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Gold As Emergency Fund

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Gold as the emergency fund, say what? You must be thinking I’m out of my mind, but hear me out. Generally, most personal finance bloggers and finance professionals recommend an easily accessible emergency fund of 3-6 months living cost. We have 3-6 months of emergency fund in our savings account which is earning a very low 0.5% interest right now. Gold as the emergency fund is another layer of security beyond the basic emergency fund.

As some of our readers know, I’m originally from Thailand (25+ years ago) and most Asians have a different view of gold than Americans. To Asians, gold is a hard asset that is portable and safer than a bank account to save your money. 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. In Thailand, when you need money, you can easily exchange the gold necklace for cash at any gold shop.

When Asians buy gold jewelry, they are saving for a rainy day. It’s equivalent to us buying Gold Maple Leaf Coins. Thai gold jewelry pieces are generally 23 karats gold or about 96% gold. That’s more pure than the Krugerrand (22k.) I don’t like wearing jewelry and only have a gold wedding band, but I’m having second thoughts after the recent run up in gold price. If I had more gold, I could have sold some and cashed out!

I’m like most middle class Americans and think gold jewelry is gaudy. Is that true? Do you wear gold chains, gold bracelets, gold rings or other gold jewelry? I think people who are decked out in blings are such show offs. Personally, I’d rather buy gold coins and stick them in a safety deposit box. I probably would lose a gold chain in the gym or something silly like that.

Back to having gold as the emergency fund. If I live in Thailand, gold would be a great emergency fund option since it is easily liquidated. In the US, I’m going to stick with 3-6 months of living expense in the saving account. (I need to open an ING account soon.) When gold price come down a bit, I’ll to buy some gold coins for a disaster emergency fund. What do you think about this plan? Do you have any gold coins under your mattress? 

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{ 37 comments… add one }

  • cashflowmantra October 12, 2011, 1:58 am

    Interesting thought. It seems like there are many places around here now that will buy your gold for cash but I wonder how much the price is reduced.

    • andrea October 12, 2011, 5:13 am

      Depends on the dealer and the condition, some get pretty close to spot. You have to shop around for a good price

      • retirebyforty October 12, 2011, 9:58 am

        I think the bigger issue is the mark up in the US. You still lose a lot of money when you sell.

  • Matt October 12, 2011, 4:46 am

    I don’t mind adding a layer of security with gold/silver coins but I do not consider it an investment. I personally do not own any but I don’t see problem with have gold or silver for a disaster scenario when you will need to move fast and need currency that can be used world-wide.

    • retirebyforty October 12, 2011, 9:56 am

      I don’t consider it as an investment either. The gold will be for a disaster situation. I know a Vietnamese refugee family that hid their gold in a bamboo stick when they escaped. You can’t really do that with cash of equivalent value.

  • MoneyforCollegePro October 12, 2011, 4:57 am

    Even though the value of a dollar does change, I would still feel much better having my emergency fund in the relatively stable dollar, as compared to Gold. I don’t want to treat my emergency fund as an investment, rather just a parked savings vehicle.

    • retirebyforty October 12, 2011, 9:57 am

      The dollar is still the safest currency in the world. I trust in the all mighty dollar too and have all of my emergency fund in the bank. You never know what can happen though so I will build up some gold reserve when the price come down a bit.

  • andrea October 12, 2011, 5:16 am

    Interesting question, because i dont have a full emergency fund i wont be buying gold any time soon. I also think the price will come down again, PM’s are so volatilevolatile. And no serious gold or silver bugs are going to admit their stash. 😉

    • retirebyforty October 12, 2011, 9:58 am

      Haha, I think you’re right about the stash. 😀

  • My University Money October 12, 2011, 5:57 am

    As long as the US dollar stays relatively strong (every time there is major turbulence in the market people still run to it) I still believe this is a safer storage of money. That being said, with all this “quantative easing” going on, who knows how longer this reality will exist?

    • retirebyforty October 12, 2011, 9:59 am

      The US dollar is still the best bet at this time, but who knows what will happen in 30 years? Chinese RMB??? Or maybe the Euro will make a come back. 🙂

  • Kellen October 12, 2011, 6:10 am

    I always wondered how much you lose out on the “exchange fees” buying and selling gold though. I assume that most places will sell it to you at a mark up, and buy it from you with a mark down. I figure that when you’re buying stocks, at least you know how much the broker is taking.

    Where would you buy your gold coins from or sell them to to cash out?

    • retirebyforty October 12, 2011, 10:01 am

      Gold jewelry in the US has a huge mark up. I think I’ll go visit Thailand to buy gold jewelry. 🙂
      There are a few gold dealers in town, but I don’t know their mark up rate either. I think it changes quite often too.

  • Funancials October 12, 2011, 6:19 am

    Very interesting. With the number of “WE BUY GOLD” shops popping up in my city, it sounds like there’s a growing resemblance to Asia. Would I ever trust them enough to exchange out my emergency fund? I’d rather not; but if I’m dipping into my emergency fund then I’m somewhat desperate already. For now I will stick with my .7% in my savings.

    • retirebyforty October 12, 2011, 10:02 am

      The gold shops are so much more common in Asia. I think they like the bling a lot more than we do.

  • Little House October 12, 2011, 7:00 am

    I’m not much into gold jewelry either, but I invest in a precious metals fund, so I kind of invest in gold for a rainy day. Very interesting perspective on gold as a savings account in Thailand. But I’m with you, if I bought gold outright, I’d have to opt for the coins as well.

  • Miss T @ Prairie Eco-Thrifter October 12, 2011, 7:11 am

    If I had some gold I would seriously look into it. I actually find this topic really interesting because I think it so strange to have literal gold laying around ready to sell. I guess I have always been a paper investor.

  • YFS @ YourFinancesSimplified October 12, 2011, 8:56 am

    Interesting topic, but I personally wouldn’t buy any commodity and use it as an emergency fund. I will go with the currency of the land. commodity prices go up and they go down. Emergency funds should be guaranteed in my opinion

  • NoTrustFund October 12, 2011, 2:30 pm

    If you live in the US, is seems like cash is far and away the best place for your emergency fund. I can see how in certain countries, where the gold market is more liquid and the currency more volatile, it would make sense to hold gold.

    As a side note, I opened an ING account earlier this year for our emergency fund and down payment money. While the interest rate is still low, it is much better than what we are getting at our brick and mortar and it does add up over time. Overall, I’ve been really happy with ING and would highly recommend taking the plunge. Like I said, the interest rate isn’t high but it does slowly add up over time, so no time like the present!

    • retirebyforty October 13, 2011, 9:01 am

      I’ll open an ING account ASAP. Hopefully, I’ll have some time to do it this weekend.

  • Invest It Wisely October 12, 2011, 4:25 pm

    I like the way that Asians will sell the gold jewellry at a small markup over spot. Even bullion is a decent markup over spot over here these days.

    I like the idea of gold as an alternative currency but I wouldn’t look at it quite as an emergency fund — more like a store of value that is distinct from the stock market, bonds, cash in your bank account, etc…

    • retirebyforty October 13, 2011, 9:06 am

      There are gold shops everywhere in Thailand and they make money on volume. I think the jewelry store here make money on mark up so it’s a different business model.

  • 101 Centavos October 12, 2011, 7:00 pm

    We bought most of our gold in the Middle East and Asia. 18 and 22 carat, with a small markeup for workmanship. Even for gold coins. In the Middle East though, we couldn’t trust the scales completely. Haggling was fierce.

    • retirebyforty October 13, 2011, 9:07 am

      In Thailand, there are reputable shops that you can trust. I don’t think there is a lot of haggling, but I really don’t know. I’ll have to ask my dad.

  • krantcents October 12, 2011, 7:56 pm

    Personally, I have never been into jewelry. I don’t think I ever bought anything other than income property or a home with the goal of selling at some point. I can not relate to people who buy art with the idea of selling some day either. I am not condemning it, I just don’t understand it, although it is not a bad idea.

    • retirebyforty October 13, 2011, 9:08 am

      I don’t understand it either. I think you have to be quite rich to afford that kind of investment or very knowledgeable about the niche.

  • Roshawn @ Watson Inc October 12, 2011, 9:53 pm

    I don’t keep gold for this purpose. Although someone worth near a billion once recommended keeping gold at a conference MANY years ago 😛

    • retirebyforty October 13, 2011, 9:08 am

      Can’t argue with a billionaire. 🙂

  • Jeremy @ Personal Finance Whiz October 13, 2011, 6:33 am

    I think the price of gold is far to volatile to use it as an emergency fund. What happens when you need to access your emergency fund at the same time gold prices dip? You may find your $30k emergency fund is only worth $20k.

    • retirebyforty October 13, 2011, 9:09 am

      That’s why I think we need cash and gold. 🙂

  • Hunter @ Financially Consumed October 13, 2011, 10:42 am

    No gold under my mattress, unfortunately. I did recently sell some silver bullion. I understand the need to diversify, especially with an increasingly volatile US dollar.

    • retirebyforty October 13, 2011, 9:50 pm

      I agree. A few gold bullions wouldn’t hurt. 🙂

  • Dr Dean October 13, 2011, 10:52 am

    I think a little hard currency for severe disaster scenario’s is not a bad thing. But it would be after all other financial scenarios were covered.

    And with my luck, my gold emergency fund would be where I’m not when disaster struck….:-(

    • retirebyforty October 13, 2011, 9:52 pm

      That’s right. When a big disaster strikes, you can’t get money out of any electronic investments. We aren’t used to thinking in that term in North America though. I think in other countries, people expects disasters more.

  • Buck Inspire. October 15, 2011, 4:09 pm

    Interesting angle. I was about to play with some of my emergency fund and get into dividend stocks, but opted to stay out because I don’t want to jeopordize my emergency fund if I needed it at a moment’s notice. I view gold more of an investment so I think I’m just going to stick to US dollars. I parked it in ING. They pay 1%, not much, but way better than fractions of a percent in my bank’s saving account!

  • Suzanne October 17, 2011, 4:30 pm

    It’s funny how we change over the years. I used to be in the fine jewelry business many years ago and thought gold was fabulous. These days I just think it’s gaudy. In fact, if I got the chance I would sell my gaudy pieces that I still have.

  • Eric October 25, 2013, 4:03 pm

    Yeah, there’s some gold stuffed away in the Bunker of Doom. It felt pretty good when this post first came up in late 2011, not so much now (down 20% ish). But maybe that means it’s time to stack a little more… 😉

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