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

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

#51

Post by sofixa »

Youden wrote: post #50
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.

Even in such countries one could rely on a car. Some medical things aren't covered fully or require prepayment to be reimbursed later ( e.g. dental or glasses, but we're talking a couple od hundred euros max, not tens of thousands).

There's also natural disasters or unexpected maintenance, appliances dying, roof/plumbing leaking, etc.

In general though, i think for most EU countries a few thousand euros is enough of an emergency fund, depending on circumstances of course.

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

#52

Post by sofixa »

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,…

Which country in South America has better and more stable economic prospects than the EU? A few of them have very serious structural issues, high inflation, dependency on specific economic sectors or unsustainable agriculture, and there were even defaults not that long ago.

Also, many of them have serious problems with crime. Depending on what freedom means for you, and the importance of economic stability, i don't think South America is a good idea.

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

#53

Post by hprotagonist »

Youden wrote: post #50
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.

getting across a border to a country that isn’t getting shelled, without access to an ATM because they’re in pieces.

getting across a border to a country that isn’t shelling its neighbor, without access to an ATM because they’ve been frozen.

there are a few cases where “hundred dollar bills stuffed in the mattress” is actually the way to go!

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

#55

Post by 2000UltraDeluxe »

luciusdomitius wrote: post #24
2000UltraDeluxe wrote: post #6

Earlier quoted context omitted.

This. Some money on a regular savings account, and some more as cash.

Regular savings account offers interest 5-6 percent below even paper inflation. How is this advice on-topic, when OP is asking how to AVOID EXACTLY THIS??

The thing is that you can't protect your emergency funds against inflation. The point of emergency funds is that you have them readily available -- not to invest them.

If inflation eats your emergency fund then you increase the size of your emergency fund to compensate for it.

It's kinda like paying for IT security; with luck it'll just be a cost that you never see any benefit from. If not, you'll be glad you have them.

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

#56

Post by Shatnerz »

Youden wrote: post #50
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.

A meteorite strikes your house and puts a hole in your roof in the middle of rainy season. You will likely need cash quickly. You may be able to get an invoice or payment plan, but a lot of workers who will patch your roof get ripped off and demand cash up front as a result.

Other examples:

- car transmission fails at a crucial time such as during travel (now you may need accommodation)

- boiler breaks

- AC failures during summer

Really any major house related or car related issue. You could argue that these are maintenance costs and not emergencies and I would agree, but not everyone approaches these the same. It is also entirely possible for several affordable and expected events to unexpectedly happen at the same time.

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

#57

Post by donclark »

Could you transfer your portfolio into bonds during market instability (#BIL specifically), so it stays flat during most draw downs vs falling down, then switch out when markets return to normal?

I created an account this week with https://beta.getquantbase.com/

I have not invested yet...

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

#58

Post by bradlys »

I used index funds. For me - huge emergencies were so unlikely that I would lose a lot of money by keeping it in cash. Yes, having $50k+ in cash is nice but it also does lose value by sitting in that account every year. Kept it in index funds instead and would withdraw in $10-20k lump sums as needed. Never saw a loss - and there were significant market downturns when I had to use this.

I think the advice also depends on your own personal scenario. In my case - I have to save extra money on top of 401k, Roth IRA, etc. in order to retire. (Social security plus that isn’t anywhere near enough) So, can use that brokerage account as an emergency fund as well. Which is more or less what I do now, tbh. The assets are all mixed. It’s mostly irrelevant.

I still keep 20k cash in my account but I try to not keep more. (Sometimes I have $10k bills in a month or what not - like having the buffer and like being able to divest an entire month or two of paychecks to just do all 401k in that time)

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

#59

Post by briffle »

Youden wrote: post #50
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.

I keep about $500 in small bills hidden I’m my car. I have been on road trips where I have had car trouble, and the small town mechanic nearby only takes cash or local checks. When it happened, I had to get a ride to an ATM with an huge fee.

I also live in the PNW, which is way overdue for a >9.0 earthquake. I keep some cash in a safe at home because it could be a week (or more) before phone systems are up and working again for things like gas stations, etc.

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