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Gold as Emergency Fund?


Gold as Emergency Fund_350Gold as a part of the emergency fund?Β 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! πŸ˜€

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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?Β 

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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.

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{ 64 comments… add one }
  • Bob October 7, 2020, 8:44 am

    The problem is that in a real catastrophe, nothing will help you actually. You have to be happy that you’ll do the best you can and adapt as no alternative is fullproof. A little of each will help but gold wont help if there’s noone to trade with, Bitcoin, uh please, needs internet and electricity and those are the first to go.
    Maybe food and water.. And probably guns for the rioters, but you aint stopping more than a dozen determined people with that and they’ll probably use the gun against you.

    I think its good to keep a little but not really expect to be able to rely on it at the time. Our best defense is that most of our assets don’t require you to keep physical copies in your house anymore and you’d be able to restart easily in another state/city if your house burnt down.

    • retirebyforty October 8, 2020, 9:11 am

      I think it really depends. Bitcoin has been very useful for Venezuelans. I don’t think we’ll get into that hyperinflation situation, but you never know. That’s a political disaster.
      You’re right about a little bit of everything. For most situations, we should be able to get through with a bit of preparation and luck.
      Take care.

  • [email protected] October 5, 2020, 10:17 am

    Interesting thought. I’ll ignore the investment aspect since that’s a whole different ball of wax.

    As part of an emergency fund, I can see how it’d work. In a genuine emergency, some sort of collapse, US dollars probably won’t hold much more weight than any other paper currency. I don’t think digital coins relying on an international digital network (bitcoin) are going to be a great choice at that point, either.

    Gold will probably be more exchangeable than paper money in an extreme scenario. But really, if that’s what you’re preparing for, I’d almost certainly invest in something totally different–especially if you’re only talking about a couple of grand worth of gold.

    Generators, food, self-protection (guns, gas mask, etc), survival gear, medical gear, medicine–all that stuff is going to be way more valuable than any form of money if we’re talking serious collapse. Imagine wandering around with a gold bar and not having any form of security or nourishment. I’d assume you’d be quite happy and quite surprised to be able to trade it for life-saving necessities.

    Thought-provoking at least!

  • Illia Kyselov September 30, 2020, 10:45 am

    Quite an interesting idea and discussion! I am just now reading this, but I really want to note one important point. For example, in our country (Ukraine), it is not very profitable to sell gold in bullion or coin. You can lose about 10-15% on the difference in exchange rates. Therefore, keeping the Reserve in gold is crazy)) The only plus is that you can really take it with you even to another country and somehow sell it if necessary. It will be more difficult with most currencies))))

  • Mr. Tako September 28, 2020, 1:08 am

    Personally I wouldn’t keep much in Gold. It’s been awhile since I looked at the return numbers, but last I check it wasn’t much higher than inflation.

    You can certainly do better than that! I also get that some people still need to have a physical asset to reassure them in this increasingly digital age. Nothing wrong with that I suppose!

    • retirebyforty September 28, 2020, 7:54 am

      This amount isn’t an investment. It’s for an emergency, right?
      I wouldn’t put much in coins either. Maybe $600 max, 20 silver coins.

  • Papa Foxtrot September 26, 2020, 7:59 am

    Gold may not always be liquid. Most shops may buy for a lower price. It is usually best to sell online to get the best price. Even then there are many fees that make the fees in the stock and bond market look paltry.

    Otherwise, gold is a fine investment.

  • WTK September 26, 2020, 2:41 am

    Hi Joe,

    Gold can be one component of the emergency. It pays to spread the eggs into various baskets.
    I am not sure whether this is applicable in view of the bulkness which may not be convenient for people on the move.


  • Fritz @ TheRetirementManifesto September 24, 2020, 8:55 am

    I’m a huge fan of diversification, and feel physical bullion is a reasonable class in a diversified portfolio. I own ~$10k of gold (coins, mainly 1 oz Eagles) and $5k of silver (again, Eagles). It’s a small enough amount to not hurt me if it’s a bad investment, but a large enough amount to add a sense of security.

  • freddy smidlap September 24, 2020, 5:55 am

    we just keep a grand in cash in a fireproof box.

    • Greg September 24, 2020, 6:50 am

      After hurricane MarΓ­a in Puerto Rico there was no electricity, no banking, no water except by tank trucks, lines to buy gasoline to run elec. generators, and anyone who had a gun was carrying (concealed). And this went on for a couple of months. What did everyone want? cash. $20 bills. If things go south, the USD may lose its value against other currencies, but WITHIN the USA, it’s going to be the only recognized and widely held asset… just by default because very few people have gold or silver coins. Have a couple thousand in cash, and take it with you if you bail out of your house in case of fire or flood. Gold coins? Not too easy to use, and if you try to spend them people are going to notice and someone may come to your house with a gun looking for your stash. A few gold coins may be good as a super-emergency backup, but getting rid of them would be really tricky. Silver is more easily bartered (and bartering is what you are doing because a silver dollar with a face value of $1 is worth close to $20 in silver), and it won’t attract as much attention. Where to hide them? Small pelican case buried at an easily remembered spot that won’t be affected if your house burns. Keep the cash in the house so you can easily take it in case you have only a couple of minutes to pack a small pack and run out the door.

      • retirebyforty September 24, 2020, 8:19 am

        Right. Gold is too expensive to barter with. Silver sounds a lot better for a 2-month long emergency.
        Did people use bitcoin? That seems okay, but it probably won’t work if power is out.
        A stash of $20 is the default plan. We have about $200 at home. That won’t last 2 months, but should get us out of town if we leave early.

        • Chris September 25, 2020, 5:44 am

          The 1 oz gold eagles are pretty expensive to barter with but another good option is the 1/10 oz gold coins. They’re about the size of a dime, so they’re pretty portable, but priced around $200/ea. based on current spot prices.

          I diversify my emergency savings with a small amount of the 1/10 oz. gold eagles and some silver eagles, but in general feel that a stack of 20s is best for most likely situations.

    • retirebyforty September 24, 2020, 8:20 am

      That’s pretty good. We have about $200 in our safe. That’s not much, but it should be enough for us to get out of town.

  • Lazy Man and Money September 24, 2020, 4:27 am

    I was talking with a friend about this the other day. From a US point of view, I’m not sure it makes sense here. I’m not sure if the market for gold is liquid enough. I don’t think a jewelry store wants a gold coin. Maybe a pawn shop would at a big discount.

    As strange as it may seem, I see bitcoin as a better alternative. I know the price goes all over the place, but it seems to hold a several thousand dollars if you have one. I feel it can be exchanged for a local currency easier (in the US at least, but perhaps also abroad). Of course it has its own problems (digital wallets get stolen, volatile pricing, etc.)

    Maybe split some money between the two as catastrophic insurance?

    • retirebyforty September 24, 2020, 8:22 am

      Actually, bitcoin sounds really good. I think a mixture of $20 bills, bitcoin, and silver coins would be good. Maybe $1,000 total. I don’t want to put any more than that aside.

  • Xrayvsn September 24, 2020, 4:08 am

    My colleague (also Asian) is a big fan of gold. The Indian culture is very similar in respect to gold as it is a great way to store wealth. I have started to get a position in gold with etf (gld) but there is an expense ratio associated with it. Gold coins carry no extra cost but like you said storing them can be an issue. Sounds like you need to get a heavy duty safe. Bitcoin is likened to gold (I have a position in that too) but who knows if it is a trend or will be here for the long haul. I do like gold coins that are pre 1933 US. Although not pure gold they have numismatic value too

    • retirebyforty September 24, 2020, 8:23 am

      Gold coins pre 1933? I don’t know much about them. I guess they will be harder to liquidate, right?

    • Marco September 27, 2020, 4:33 am

      Gold coins carry huge extra cost, the shops usually sell them at the price of gold plus 10% and buys them at the price of gold minus 10%.
      The cost of a Gold ETF is usually 0.5% per year, you need to hold gold coins for more than 45 years to incurr in less costs than what you pay with an ETF during the same time.

  • Financial Freedom Countdown September 23, 2020, 11:01 pm

    Joe, move to digital gold aka bitcoin. It is portable and divisible. Can’t buy a loaf of bread with gold unless the baker has change. But you can with bitcoin. Wrote a long article about it on my blog if you want to check it out πŸ™‚

    • retirebyforty September 24, 2020, 8:23 am

      Thanks for the suggestion. I think we’ll go with a mixture of $20 bills, bitcoin, and silver coins. That should be plenty.

  • 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… πŸ˜‰

  • 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.

  • 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!

  • 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.

  • 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. πŸ™‚

  • 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. πŸ™‚

  • 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 πŸ˜›

    • retirebyforty October 13, 2011, 9:08 am

      Can’t argue with a billionaire. πŸ™‚

  • 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.

  • 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.

  • 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.

  • 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.

  • 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

  • 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.

  • 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.

  • 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.

  • 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. πŸ™‚
      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.

  • 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. πŸ™‚

  • 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. πŸ˜‰

    • retirebyforty October 12, 2011, 9:58 am

      Haha, I think you’re right about the stash. πŸ˜€

  • 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.

  • 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.

      • Sharil October 19, 2020, 2:28 am

        If the pandemic has thought us one thing is that in an national emergency situation, everything would most likely be closed including shops. Groceries would be worth more than gold, it would depend on who needs what the most. Gold, money and other monetary commodities would only be valuable if the financial bodies are still in effect. I say get a room filled with stock for such emergencies and in a financial crash, cash will always be king.

  • 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.

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