Gold as Emergency Fund?

Gold as Emergency Fund_350Gold as a part of the emergency fund? Say what? Am I out of my mind? But hear me out. Most personal finance bloggers recommend 3-6 months of living expenses in an easily accessible account as an emergency fund. We have that much in our savings account which is earning a very low 0.1% interest right now. In light of current events, this much emergency fund seems a little light. Having some gold would be another layer of security beyond this level of the emergency fund.

*This post was originally written in 2011! I still don’t have any gold coins, but I’m thinking real hard about it. The pandemic, wildfires, and riots show us that 3 months of living expenses might not be enough. Having a second layer of emergency fund sounds like a really good idea right about now.

Gold is a portable hard asset

As some of you know, I’m originally from Thailand (30+ years ago.) Most ethnic Asians have a different view of gold than Americans. To Asians, gold is a portable hard asset. It’s almost safer than putting money in the bank. In Thailand, you can buy gold jewelry at a very small premium (5%) over the spot price. In comparison, you will pay 100% – 300% mark up in the US for a gold necklace. Here gold is more of a luxury good and the price is marked up for craftmanship, brand, rent, labor, insurance, and various other factors. In Thailand, when you need money, you can easily sell the gold necklace for cash at any gold shop.

When Asians buy gold jewelry, they are saving for the rainy days. It’s equivalent to buying gold Maple Leaf Coins in North America. It’s just a safe place to stash your savings. Thai gold jewelry is generally 23 karats gold or about 96% gold. That’s purer than the Krugerrand (22k.) I don’t like wearing jewelry and only have a gold wedding band. I think flashy jewelry is gaudy. Luckily, my wife agrees and she doesn’t have any jewelry either. So buying gold necklaces isn’t a good option. For us, it’d be better to buy a gold coin or two. It’ll be easier to sell in the US too.

The big problem would be where to store a gold coin? We could put it in our fire safe at home, but it really isn’t that secure. I don’t trust these little safes at all. The door fell off our previous fire safe without any intervention. We could hide it, but I know I’m going to forget where I put them. I already can’t find my car keys. Ha! 😀

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Is gold a good emergency fund?

  • 1 oz American eagle gold coin cost about $2,000
  • 1 oz American eagle silver coin cost about $30

Okay, let me know what you think? Should I buy a few gold coins just for an emergency? If a big disaster hits, it’ll be very difficult to get cash out from any electronic accounts. Although, gold wouldn’t be convenient either. What if we need to buy some food and the only thing we have left is gold. Shopowners wouldn’t have change for a gold coin. Maybe silver coins might be a better emergency disaster fund. Is there a better option than gold and silver? Here are the criteria.

  • portable
  • easy to liquidate
  • universally accepted
  • easy to store

What do you think about this plan? Do you have any gold coins under your mattress? 

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Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, the job became too stressful and Joe retired from his engineering career to become a stay-at-home dad/blogger at 38. Today, he blogs about financial independence, early retirement, investing, and living a frugal lifestyle.

Passive income is the key to early retirement. This year, Joe is increasing his investment in real estate with CrowdStreet. He can invest in projects across the U.S. and diversify his real estate portfolio. There are many interesting projects available so sign up and check them out.

Joe also highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help DIY investors analyze their portfolio and plan for retirement.

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