Keep emergency fund in equities, or always cash account?

[DeeKie]

What about keeping the emergency cash in prize bonds? That's what I was thinking of doing, instead of current account

 

[Sarenco]

They are both in employment. They are subject to PAYE. Maybe they are building up a big tax liability by not paying the tax on their rental income.

I've no idea about their employment status.

You said "if they have no income, they won't have a tax lability". That's obviously not necessarily so.

Which Great Depression?

Was there more than one?

I'm not trying to be smart but if somebody referred to the Great War would you ask which one?

I would suggest that both phrases have a commonly understood meaning.

I wouldn't have thought that outstanding taxes were the major cause

It's not a controversial statement - it's a well documented historical fact.

As an aside, I would strongly recommend that anybody that is interested in finance (personal or otherwise) devotes some time to read up on the reality of what happened during the Great Depression. It certainly changed my view of the world and the reality of deep, left tail risks.

 

[Sarenco]

What about keeping the emergency cash in prize bonds? That's what I was thinking of doing, instead of current account

Certainly a better idea than keeping the funds in a current account but I would still recommend keeping those funds in an instantly accessible, interest bearing, deposit account.

 

[ixus]

I'm a Trader by profession. Keeping emergency funds in equities is a terrible idea imho. I would have to aggressively dismiss it and am pretty shocked it is being supported in any form.

The order of safety would go along the lines of:
Short term US debt, up to 2/5/10yr Treasury
German 2/5/10 yr debt.
USD denominated bank account with a top rated bank.
Smaller funds should look at the "safe" banks and spread the funds in short term demand accounts. E.g. BOI over AIB as they have cleared up their book much more strongly.

Equities would be way down the list. Way down.

Edit: A GFC is not needed for a blue chip stock to collapse 50% in value. Check out the movement in the following shares over the last two years. Each would have been viewed as blue chip but have been damaged due to one scandal or another:

VW
Tesco
Deutsche Bank
BHP Billiton
Toshiba