Retired.
6 months instant access. Currently earning 4.7pc.

We have an emergency fund of approx. £16k. £2k is in an instant access account, with the balance in premium bonds which can take a couple of days to clear if needed.

Generally I’d consider any NS&I product that can be accessed instantly or near enough instantly as cash.

In reality I do have more cash than this but it’s in things like sinking funds for expenses I know are coming up. The sinking fund account consistently sits at between £3k-£4K because I pay in a monthly amount for car insurance and repairs, house insurance and repairs, Christmas, self insurance for boiler and pets etc. Starling Bank pays 3.25% interest on this which isn’t terrible for a current account.

There is also a fairly sizeable maternity plus set up costs pot of about £18k. That is also in premium bonds. But this is obviously temporary and will be used over the next 11 months and won’t be replaced after.

I do also use some interest free credit in the form of a 21 month 0% credit card for liquidity, but only for larger purchases I know I already have cash for but would like to let the cash sit earning interest for a bit longer.

Hmm there's a theme here so let's turn this on its head a bit.

If I said.

* Stable (barring randomly losing my job) net income of £3.2K a month.
* £2-6K in current account depending on time of month but never drops below £2K
* £20K in instant savings account at bank
* £26K in NS&I index linked certs
* £10K credit card limit paid in full every month

Would the general view be that's just way too much cash to justify?

Appreciate this is a personal thing but of the £20K in instant savings what's the lowest you'd be comfortable taking that down to?

I literally don't touch most of those pots but I'm struggling slightly with how much I should drop down to.

I'm also struggling to think of a situation where I might need that sort of cash literally immediately.

Psychology eh!

I am more extreme than Andrew perhaps even less cash in bank, but more possible on credit cards (cash back cards only, paid back in full every month), but you got to be aware of how long it takes for MMF, OEIC and ITs to be sold then the abnormal long time it takes to be cleared and then transferred into your bank account...not to mention bank holidays to consider.

Being international I also have a Wise account that pays 4.7% minus fee on GBP with instant access to money as long as you don't invest in stocks. I do worry about loosing my phone with something like Wise so don't hold more than £10k across 3 currencies. It is worth paying the one of fee for the cash card.

Basically the faster you can access your money the more you can invest.

Minimum I’d personally go down to for that £20k (which I assume is your sort of emergency fund ‘proper’?) is whatever 6-7 months of living expenses comes to. And that’s also pretty much my maximum!

But I do mean 6-7 months living expenses rather than 6-7 months income. So if it were me I’d take that £3.2k net, minus out monthly investments and some discretionary spending (leave yourself a bit of discretionary in case of job loss, maybe £200 or so per month) and multiply it by 7. Whatever that ends up at is what I would personally consider reasonable.

The £26k in index linked NS&I is probably a tricky one psychologically! Because it will pay you RPI with no volatility, and once you liquidate them they cannot be replaced as they no longer exist for new customers. TBH, for me, I might consider tying up the £26k as worth it just to spite the spendthrifts in Westminster who really don’t like debt they have to somewhat honestly pay back some day! But in reality, the money would probably work harder for you if used to buy some decent investments instead! It’s a tough one though.