Every single bit of advice out there in the world of personal finance says that you need to have a Savings Account as a key part of managing your finances.
And yet here I am with absolutely no savings talking about money topics on YouTube.
I am fully aware that this is the sort of topic where I will get a bunch of people telling me I am an idiot straight after smashing the Dislike button, but I'm ok with that.
I have a different opinion and I want to share it because the world in which we live today is different to the world people lived in 70 years ago.
Today you can have access to very cheap ways of holding liquid assets that have the ability to earn you money.
Today we have access to credit facilities which can cover the immediate need for funds at zero cost without the need to get into real debt - giving you time to liquidate whatever assets you need to and repay the credit card in full.
So for the traditional reasons of needing an emergency fund for either living expenses or an unexpected one-off cost, there are tools for overcoming these that are very easy to use, very accessible and, best of all, free.
And I personally prefer having these tools that cost me nothing, rather than keeping 6 months' of my expenses or more sitting in a Savings Account losing me money instead.
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DISCLAIMER: Some of these links may be affiliate links. If you purchase a product or service using one of these links, I will receive a small commission from the seller. There will be no additional charge for you.
DISCLAIMER: I am not a financial advisor and this is not a financial advice channel. All information is provided strictly for educational purposes. It does not take into account anybody's specific circumstances or situation. If you are making investment or other financial management decisions and require advice, please consult a suitably qualified licensed professional.
And yet here I am with absolutely no savings talking about money topics on YouTube.
I am fully aware that this is the sort of topic where I will get a bunch of people telling me I am an idiot straight after smashing the Dislike button, but I'm ok with that.
I have a different opinion and I want to share it because the world in which we live today is different to the world people lived in 70 years ago.
Today you can have access to very cheap ways of holding liquid assets that have the ability to earn you money.
Today we have access to credit facilities which can cover the immediate need for funds at zero cost without the need to get into real debt - giving you time to liquidate whatever assets you need to and repay the credit card in full.
So for the traditional reasons of needing an emergency fund for either living expenses or an unexpected one-off cost, there are tools for overcoming these that are very easy to use, very accessible and, best of all, free.
And I personally prefer having these tools that cost me nothing, rather than keeping 6 months' of my expenses or more sitting in a Savings Account losing me money instead.
💵 SOME USEFUL AFFILIATE LINKS TO PRODUCTS I USE
SIGN UP TO INVEST WITH ETORO (MIN DEPOSIT $200)
https://med.etoro.com/B15358_A95689_TClick_SSasha.aspx
67% of retail investor accounts lose money when trading CFDs with this provider. Your capital is at risk. Other fees may apply.
GET A FREE SHARE WORTH UP TO £200 WITH FREETRADE
https://magic.freetrade.io/join/sasha-yanshin
You need to sign up and make any deposit to get the free share.
GET A FREE SHARE WORTH UP TO £100 WITH TRADING 212
Use my link: https://www.trading212.com/invite/FzYbCfTM
You need to sign up and make any deposit to get the free share.
GEAR I USE FOR MAKING VIDEOS
https://kit.co/sashayanshin
DISCLAIMER: Some of these links may be affiliate links. If you purchase a product or service using one of these links, I will receive a small commission from the seller. There will be no additional charge for you.
DISCLAIMER: I am not a financial advisor and this is not a financial advice channel. All information is provided strictly for educational purposes. It does not take into account anybody's specific circumstances or situation. If you are making investment or other financial management decisions and require advice, please consult a suitably qualified licensed professional.
Hey guys, it's sasha people are often really surprised to find out that i don't actually have a savings account. What is a guy doing talk about personal finance on youtube when they don't actually have any savings right? What madness is this now? Almost every finance channel youtube channel out there. Almost all the books will say that a savings account is a must. It is the most important thing you can do after paying down your debt.
You need to make sure that you have this account. That has at least six months worth of your everyday living expenses in it in case the worst thing was to happen, and yet here i am with exactly zero pounds in savings, and i want to tell you exactly why that is one thing i really just like. Is money sitting around collecting dust and doing absolutely nothing? Inflation is eating awaited like a coyote, and the money could just be doing something useful. It could be working for me, but instead it sits in an account somewhere doing nothing at all.
That is what people call savings these days, look at the best savings rates available in the uk today, if you go and look at something where you don't have to put your money away for a long time, because that kind of negates the point of having an Emergency fund we're talking something like 0.4 to 0.5 percent per year. Sure there's a few of bowls. For example, version money has a current account that pays you two percent balances of up to 1 000 pounds, for example, but if you have any sizeable savings, as i guess that probably isn't six months worth of expenses for most people, you'll be earning less than inflation. So your savings would actually be losing you money instead of growing it.
So let's break down the arguments that most people have for having savings and why i don't think any of them really apply now. The first argument is that you should always have an emergency fund. In case you have an unexpected cost or find yourself in some kind of tricky situation. Those savings make sure that you can go and replace your boiler for breaks fix your car.
You know i'll be able to cover your bills when you lose your job, but do you actually need to have six months worth of your money sitting in a separate bank account for this relatively unlikely situation, and is it the best way of overcoming it? Do you need to have years worth of money wasting away for that one time when you might need to use it? My opinion is that the answer to this question is no and just to be clear. This is my personal opinion. I am not a financial advisor and i can't provide financial advice to you. I can't tell you what to do.
I'm just a schmuck on the internet, but i'm just gon na tell you what i'm thinking and how i am managing my own finances in this. I personally keep my money working by having it invested, and some of it is not liquid like, for example, the money that i have invested in this house. But a lot of my investments are relatively liquid, for example the ones in the stock market and they can become cash. Literal active cash sitting in my current account in about a week and for you know, for accounting for the time to sell the stocks and for the transfer to my bank account to happen. If i need cash urgently, i always keep a buffer of a few hundred pounds in my current account, so they don't go right down to zero and that, for most things will be more than enough, especially for things that can be covered by paying with card. For anything major, let's say card trouble, medical issues, my boiler, breaking down anything like that. I can go and use a credit card that i already have. I literally have it sitting there as a way of being able to cover an emergency and before anyone goes and says, hey sasha, you are completely wrong.
Borrowing money for that emergency is the wrong way to go about it. That's how you get into debt, that's the worst thing ever. I have zero plans of getting into debt if that situation was to happen, what i'll do if that situation arises and when it arises, is i'll, go and spend on the card? I then have plenty of time, because i have about a month until i have to go and pay that credit card bill and full i can go and liquidate any liquid assets that i need and the best thing is. I only need to liquidate the exact amount.
I actually need not a lot more than that and then that money will come in as cash into my current account and pay the direct debit in full, and the best thing is. This will cost me absolutely nothing, because there are no fees of just spending on your credit card and then repaying it in full. Now, in a situation where i need several months worth of money to live um, i can relatively easily steadily live off. Whatever stocks i intend to sell when and the best thing is, i can sell them as and when i need it, you see the beauty of doing it.
This way is i don't have to keep enough money for the worst possible scenario. I don't need to say what is the how much? What is the maximum i'll need over a six-month period and then keep that much? I can just keep my cash sitting in assets and in an emerging situation, i can only cash in the amount that i actually need and all the while that i do not need that money, which may be several years that money is actively working for me exactly Sitting in the stock market or wherever else i have it invested, and it is earning me more money on top now, i know some people say it's a shame to sell stocks for this. You know it's such a shame to have to sell off your investments so that you can cover your knees, but the thing is: if i didn't put the money into those investments in the first place, if i kept it as cash, i wouldn't have anything to sell Anyway, so i'm not exactly going to be in a worse situation if this eventuality, for which i'm preparing and prepping hard for, does not ever materialize, then i get to never have to sell the stocks anyway. Now i do appreciate that my view on personal finance may well be very, very different to other people and that some people might be uncomfortable with investing all of their money, because you know cash is king, but i don't really share that point of view. In the long run, those investments that i have across the different asset classes that i plan to have will deliver real results. While cash sat in a bank account that pays you nothing or worse than nothing, because it's actually less than inflation will just dwindle away. Much of this advice that people give over and over the same advice given by youtubers dave ramsey everyone out, there seems to stem from a time when you know you didn't, have the same flexibility in managing your finances. A time when you couldn't just go and invest in various different things without it taking a huge amount of time without it costing you a huge amount of money and without massive minimum deposits required in a time when it would take you many weeks and sometimes months To go and sell some of those assets in order to be able to generate cash, i completely get it, but the game has changed and there are so many different avenues where you can go and invest your money in really liquid ways.
Without all that cost, and without those minimums, but the advice on how to manage your money seems to have not changed from the same advice that we all had in the 50s now had a moderate 80 return in the stock market, for example, over a long period Through a high risk high return strategy that i employ because i'm a relatively young person my six month, piggy bank would cover 12 months in just nine years time. So if i wait nine years for that eventuality, when i lose my job, i then get to take my six months worth of money out and i still have another six months worth of money sitting in investments after i do with withdrawal. But i guess we all think differently, i'm guessing a lot of people are going to be thinking that i'm a risk-taking idiot when you know in my mind this is a mathematically, far superior far more optimal solution. Some people will say that if they invest their money, they can't sleep at night worrying what will happen with that money? Will it lose some value, and will that mean that i won't have enough, maybe for the six month or the fifth month or something like i? Instead would worry that i have all of this money sitting in account doing absolutely nothing and that is losing value instead.
Now make sure you leave a comment, whether you think that i'm really dumb or if you agree i'll, be really really interested hearing thoughts, and thank you so much for watching. As always, i really really appreciate it. Thank you so much, and i will see you guys later. You.
Naturally from the rational point of view you are absolutely right, but there's the psychological aspect that I believe you are forgetting. Knowing that one has some money reserved in the case of an emergency does well from a peace of mind point of view and that shouldn't be disregarded. It's almost the same argument as lump sum vs drip feed. Statistically lump sum is almost always better, but people feel more psychologically safe if they drip feed in case of a crash
I agree in principle but I would add that the amount invested in volatile assets (stocks) should be at least double that of the required emergency fund in order to eliminate a cash emergency fund.
I would also want to have a sizeable overdraft and several lines of credit available. Preferably at least one line at 0% for six months, with a decent credit.
It's usually the case that people lose jobs in economic downturns. So a market crash and a job loss can go hand in hand. In such a scenario if the value of your portfolio is down by 50%, selling a part of it to cover living expenses is a big hit. On top of it all, a recession can also mean lenders tighten up on credit and reduce one's credit lines, maybe closing them altogether. This would be a perfect storm, a triple-whammy.
Ultimately it depends on how confident one is in one's own personal circumstances/ability to generate income in adverse conditions. But I would always have a bit of cash, at least 1 month worth of income at a mininum as the lowest cash balance during a month, as a sort of buffer.
This is not something I had considered before. When I started investing in the early 1990s, I bought funds (then called Unit Trusts) direct from the fund managers. When I wanted to sell I sent written instructions through the post and received a cheque around two weeks later. Then I had to make a trip to the bank to deposit the cheque, and after that wait three working days for the cheque to clear. All in all it took the best part of a month to receive my money after first requesting it. This is something that has definitely changed for the better!
Great video Sasha with a very interesting and well argued point of view. I have decided to implement this to give it a chance. For the time being I have put my emergency fund in Wealthsimple (I don’t think you have done a review on that yet, will you be?) until Trading 212 is open, Freetrade looks good but I would rather start in T212. Thanks again, glad to find a Youtuber in the UK talking money for a change!
Your logic makes perfect sense but I don't think I could ever fully ditch my savings account. I am only 20 years old and, while I have the majority of my money invested, I feel I am too naive and young to fully invest everything. It is hard to overcome one's emotions!
I was at a retirement seminar and the speaker spoke on how he quit his job after he made well over $450,000 PROFIT within 3months he invested $120,000. I just began investing and i will really appreciate any tips or helpful guide.
Sorry about the morbid comment. But what if the worst happens, and your partner needs to keep the bills paid whilst your affairs are sorted out? Having complex financial arrangements in place can be difficult to navigate if that person is less savvy than you, and may get into difficulty. This is why I'm nervous about not having cash in a bank account to cover 4-6 months whilst things are sorted out.
You are spot on. The government are printing money like there is no tomorrow and crazy inflation is going to come soon. 0.5% interest will end up losing you money due to inflation. I have some fixed rate ISA's at 1.75% and I'm not happy even that will cover the upcoming inflation. Something has to be done to protect our money.
Sasha, I’m trying to follow your strategy viz, using my disposable savings to invest in shares. Especially now in a crash. Buy low and sell high and all that.
However, my Trading 212 account application is suspended for 2 months. God knows when I can join. So for long term investing in ISA shares, what’s the best platform? Freetrade?
Might be worth scheduling in some regular spending on your credit card. Credit limits on cards can drop quickly if you hold them but spend little or infrequently. Also, your credit rating may get dented (and refusals on applications that rely on these scores affected). Often not a problem if you can liquidate investments very quickly, but sometimes you just need larger amounts of credit or cash quickly e.g. Car hire deposits on credit cards. Just a thought!
So Sasha I am inline with your views BUT most people have no knowledge of asset management and this can lead to bad choices. How does one create a portfolio that is manageable in a stock market that could be hit hard by inflation?
I own stocks and also have a 0% interest student overdraft. That could easily be an emergency fund and I could liquidate the assets in a week tops. I never thought about that. Even if it did lose value, I feel that's it worth a shot anyway. At the end of the day, it's not exactly all going to go down to zero
I've come around to this way of thinking in the last few weeks. But one thing I'm not sure if you really mentioned is: the time when you're most likely to need money, is also the time when your shares are most likely to have lost value. Example: coronavirus lockdown, a year ago. Lots of people were put out of work, and the stock market crashed. A one-off? Perhaps. Or perhaps not. [edit] I see now that you've responded to this point in other comments. [/edit]
On balance, I think you're right, and I've taken all my money out of my cash ISA (which was my rainy day savings) to put into stocks and shares instead. But it's not without risk.
I did not invest in stocks/shares until I had some readily available cash.The thought of having to sell stocks after a market crash,March 2020,would irk me to much.However,I built up a decent sum and now do invest in a stocks/shares isa where I pay in monthly.The aforementioned crash wiped out most of its gains,but as I had still a decent cash reserve,I was still able to afford a new combi-boiler and paid £1700 cash for decorating purposes last year.I continued paying into the stocks/shares isa during this time and it has recovered well,buying stock at low prices,now showing a very decent return.I continue paying into my cash reserves and now and again will buy further stock,ad-hoc,when I spot a bargain
What if you put your money in stocks and after 1 week there's a crash. One day later you need it because you totaled your car. What are you going to do? Withdraw 1-2 months of cash because you lost the rest? You'd lose serios cash
As a regulated financial adviser in my 20s who takes advantage of the latest trading technologies available when trading, i would never not want an emergency fund. If you can't afford to take the hit on the value of your emergency falling in real terms, you are unlikely to be in a position to afford to have your assets all in investments. No matter how liquid they may be!
Hi Sasha, it was nice to see this video, I've done a similar thing with my emergency fund recently – just makes sense imo! My question to you is: what do you do when you want to buy something, rather than need it? For example a new watch, bike or holiday. Personally, I have a seperate fund for this, which is currently in a current account! Investing this money seems logical after your video, although I know I wouldn't want to sell after I've invested! Having it in a current account allows me to enjoy some of my earnings guilt free 😃 thanks for reading!
I agree to a degree. It highly depends if your assets has value or can get you the amount you need when you need it. Never know when you can’t find a buyer or the value sharply drop. Personally, I’ll rather have some liquid funds before investing.
To be honest, Sasha, although I intellectually appreciate your argument and the merits of what you are saying I feel slightly brainwashed maybe by dave Ramsey et Al and have a large reserve of cash getting only a tiny amount of interest. I fear that I am too risk averse in these days when interest rate returns are so pitifully small. Thanks for a great video, food for thought, and interesting to hear your counter argument.
Absolutely. This strategy would not have worked a decade ago, but with the accessibility of today’s trading platforms, money in an investment account is easy to pull out when needed and, in the long run, will easily gain more than a savings account at a bank.
Sasha can not agree more! On top of your points inflation or CPI is one of the biggest lies governments publish. The methodology for its calculation is deliberately super complicated and developed to keep this figure as low as possible to their target usually at 2-4%. The real inflation is much much higher- for us ordinary grants we just need to look at tesco bills – check how much milk, lettuce or bread was a year ago. Or better check smth from Italy or Spain.
Now you need much more than 4 % appreciation of your money or they are wasted. We are talking 10-15%.
I am not ready for stock investing yet. Just using vanguard funds 60% in developed world equity (no uk stocks thanks they suck for foreseeable future) and 40% in global grade a bonds.
It’s all about risk tolerance and credit availability. Mathematicly it’s logical. I have rental properties and need to have a 3-6 month buffer and if I didn’t during the pandemic it could have become difficult. I didn’t need to draw on it at all which kind of agrees with your conclusion…. it’s probably there for my own sanity more than anything! Keep up the good work!
I think the phrase 'eaten away by inflation' is getting overused after 12 years of record breaking stock market returns. Money losing 2% value due to inflation beats stock investments falling 10-20% if that's what's ahead. Saving money is conservative. Investing money is risky. I think touch has been lost with how real risks are with finance in the current hype
Generally, I agree with you.
Would one potential danger though be a financial crash similar to 2008? Potentially you may lose your job and find your investment value has fallen dramatically at a time when you need to withdraw your money.
Unrelated, would appreciate a video on PrimaryBid with recommendations of brokers that they support. Or alternatively purchasing IPOs in general.