Ask HN: How do you protect your emergency fund from inflation? • Hacker News Board

Re: Ask HN: How do you protect your emergency fund from inflation?

#41

Post by misja111 » Thu, Mar 17, 2022, 9:41 AM UTC

iamthemonster wrote: post #5

It probably depends greatly on your personal circumstances but if you are already investing, or have a Home Equity Line of Credit available, or good credit so that you can get credit cards, then it's quite possible that an emergency fund is just not required (or in other words you keep your emergency fund invested) https://earlyretirementnow.com/2021/05/26/the-emergency-fund... I think younger folk or those in a less…

Stocks as a general protection against high inflation is an extremely bad advice, unless you specifically pick those stocks that will go up together with inflation. But most stocks will do exactly the opposite! The reason is that stock prices are inversely correlated with market interest rates. And when inflation goes up, central banks will increase interest rates to suppress inflation. This is happening at this moment already.

There are very few stocks that will keep up with high inflation. These are for companies whose valuation is mostly based on the properties they posess, such as e.g. real estate.

Re: Ask HN: How do you protect your emergency fund from inflation?

#42

Post by bb123 » Thu, Mar 17, 2022, 9:42 AM UTC

luciusdomitius wrote: post #8

Right now the two alternatives are PHYSICAL gold(massively undervalued) and BTC. ECB won't really increase interest rates as the last time they did it (11 years ago) half of Southern Eurozone almost went bankrupt. Out of the stock market - probably energy and defense stocks. Also food production and commodities. To be honest I am seriously considering a move to say South America. Even if we don't end up in a hot war,…

Don’t put your emergency fund in gold and BTC. It needs to be liquid (I.e same day available) and predictable.

Re: Ask HN: How do you protect your emergency fund from inflation?

#43

Post by bb123 » Thu, Mar 17, 2022, 9:44 AM UTC

luciusdomitius wrote: post #32

unmole wrote: post #29

Earlier quoted context omitted.

Having emergency funds in highly volatile assets simply means you get rekt in an emergency.

Alright, let's look at historical data - who was more successful at fleeing Nazi Germany? The ones who had jewelry in their pockets, or the ones holding a fat bag of reichsmarken? It is THIS obvious.

An emergency fund is for paying your mortgage if you lose your job, or settling a large car repair bill. No one here is seriously asking how to protect their investments while fleeing on foot from a genocidal regime in total war.

Re: Ask HN: How do you protect your emergency fund from inflation?

#44

Post by schemester » Thu, Mar 17, 2022, 9:49 AM UTC

Some brokerages let you have a debit card and/or checking account, and you can borrow on margin from invested funds.

Re: Ask HN: How do you protect your emergency fund from inflation?

#45

Post by [deleted] » Thu, Mar 17, 2022, 9:52 AM UTC

luciusdomitius wrote: post #32

unmole wrote: post #29

Earlier quoted context omitted.

Having emergency funds in highly volatile assets simply means you get rekt in an emergency.

Alright, let's look at historical data - who was more successful at fleeing Nazi Germany? The ones who had jewelry in their pockets, or the ones holding a fat bag of reichsmarken? It is THIS obvious.

[deleted]

Re: Ask HN: How do you protect your emergency fund from inflation?

#46

Post by reitzensteinm » Thu, Mar 17, 2022, 9:57 AM UTC

jpgvm wrote: post #23

gonzo41 wrote: post #19

Earlier quoted context omitted.

Check your loan conditions, your bank may have rights to money in excess of scheduled payments. Unless your talking about a specific offset account as opposed to the actual loan account. Not a CPA but got told this advice with regard to larger savings. If the bank has trouble it can snatch up your redraw. YMMV

If my bank is having trouble (by far the largest in my country) I'm beyond fucked and I don't think it will matter much how much of my paid-in-advance funds they can take. It's sort of like worrying about how living in an apartment building I will probably be incinerated by a nuclear blast hitting my city whereas I could live long enough to witness the end all life if I had a house a few suburbs out. If nuke hits Mel…

You're probably right you don't have to worry too much about the bank going bankrupt.

But if the primary purpose of the emergency fund is to smooth things out if you lose your job, that's literally the moment the bank will get cold feet about lending you money it's not contractually obligated to.

If the economic trouble causing your job loss coincides with a drop in house prices and all of a sudden you're underwater, it's hard to imagine a clause like that not being triggered, should it exist.

Re: Ask HN: How do you protect your emergency fund from inflation?

#47

Post by Archelaos » Thu, Mar 17, 2022, 9:58 AM UTC

For emergencies I got myself a line of credit from my bank using my stocks as collateral. Currently the line of credit amounts to apox. 20% of the values of my stocks, which is far below the possible maximum, just to be sure in case of a falling market. The interest rates for such a credit are modest, because there is a collateral.

I can recommend to anybody who ownes stocks to ask your bank about such a line of credit, because it has no costs as long as you do not need the credit, but if you need money you can immediately draw a flexible amount of cash for exactly the time you need it.

Re: Ask HN: How do you protect your emergency fund from inflation?

#48

Post by david38 » Thu, Mar 17, 2022, 10:12 AM UTC

luciusdomitius wrote: post #34

Adrox wrote: post #30

Earlier quoted context omitted.

Yeah in South America you are much more free to get robbed or murdered. (I'm talking about Brazil, Argentina, Colombia, not sure what's your preferred country).

If you can handle a gun, it is much easier to defend yourself against a bunch of robbers, than the entire state apparatus.

Spoken like someone who has never done so.

Do as you say and you’ll find yourself the target of a gang retaliation. You plan on packing automatic weapons? You going to kill ten people? Even if you do it in self defense, you’ll get killed in jail while awaiting trial.

Re: Ask HN: How do you protect your emergency fund from inflation?

#49

Post by vxjester » Thu, Mar 17, 2022, 10:16 AM UTC

davidkuennen wrote: post #9

How big should an emergency fund be? In my case it would be so small that even inflation wouldn't justify having it somewhere that is not my savings account. Everything that is not an emergency fund is in stocks/etfs.

First try saving $1000. Then after that. go save for what ever your total expenses are for 3-6 months. It should be in an account that you can quickly get to. Not in stocks. Just a plain old savings account works.

Re: Ask HN: How do you protect your emergency fund from inflation?

#50

Post by Youden » Thu, Mar 17, 2022, 10:25 AM UTC

Shatnerz wrote: post #4

You don't. Emergency funds are for emergencies. Higher yields are possible with various different investments but they all come with additional risk. You do not want to have an emergency fund they may drop in value during a period which you may need to draw on your emergency fund, such as a market downturn that leaves you unemployed. Similarly, you want to be able to access emergencies funds quickly. Emergencies are…

Honest question: unless you're American, what kind of emergency could require a large volume of cash in less than a week?

In the US it makes sense for medical bills or a broken car or something but in a country with sane healthcare and public transit, I'm having trouble thinking of anything.