Emergency fund in Switzerland necessary?

The way I see “EF” is how long can I survive without income or touching my investment?

Obviously my car insurance is yearly but I still budget it monthly.

Thinking about my “EF” some more, I guess it’s more for my peace of mind, knowing that I can splurge from time to time or make a unexpected expense. I could use my credit card for that but i wouldn’t be comfortable with that.

BTW where do you live to get by on 900! a month, even my health insurance is half that! :slight_smile:

1 Like

After a couple of weeks with 0 liquidity I came to the conclusion that it’s bugging me. Sold 35 VTI today for 221$.

I will use my monthly savings rate (minus VIAC contribution) to refill my EF for the rest of the year.

7 Likes

Hey guys, wanted to share something I discovered accidentally and might be useful to those that don’t want to keep such a large emergency fund

I was trying to load my Revolut card and couldn’t with a bunch of cards. I decided to try with the Cashback Credit Card (Mastercard version) and it worked! Additionally no fees!
So I am able to tap into my credit limit without paying anything, so if I get a bill I can’t pay by credit card I can also use the credit limit that way.

Personally I keep around 2k as an EF/“Buffer” until I get next month’s salary. I am quite frugal so if I have some expense planned I will usually do it after I get paid. I also have around 10k in very liquid Euro Bonds which I can cashout in 2 days or so.

5 Likes

Well, your withdrawal limit with Revolut is 200chf/eur/usd.

You can transfer it to your Neon account and withdraw it from there. Or just make the orange/red payment from there.

Will depend on what sort of emergency it is of course

2 Likes

I was using various free Swiss credit cards to load Revolut and never had any fees.

Exactly.

I was loading money from a credit card and transferring them to my other bank account. After some time I got a message that it is not allowed to use Revolut to provide cash advances to yourself (and it wasn’t what I was really doing).

First I thought that you are talking about Revolut, but now I understand that you meant Neon. Pity, would love to pay Swiss payment slips from Revolut.

2 Likes

It contradicts their user agreement. Didn’t you read it?

What they seem to not like is

  1. Charge a credit card with CHF
  2. Send CHF to your own bank account.

With a CHF to EUR exchange step it should be perfectly fine, this is a purpose of anyone using the app, after all.

If you send money to a third party, it also should not raise red flags, I think.

So it is Neon doing CHF-> EUR exchange?

I guess if you are using a debit card, it also should be OK.

I am not going to exchange more than a commission-free limit of a free account. So far I turned over 5-6 kCHF. Always sending to myself.

Why?

If it is not a credit card, it is probably fine. Anyway you should be OK until you get a warning.

Which, AFAIR, according to what I read on this forum, are worse than Revolut market rates.

OK, probably makes sense.

Not related to the topic anymore.

2 Likes

I‘ll admit that I‘m someone that used up his EF in 2021 and 2022 (both times not for emergencies, but for investment opportunities in the RE market). So right now my EF is again at 0 and waiting to be refunded by my next bonus in 2 months. So the last couple of months without an EF left me with enough time to think about it.

Maybe it would make more sense to calculate it differently. Not just something random like 3-12 monthly expenses. But rather something that‘s more individual. My idea was:

Make a list of all possible emergencies, calculate max. costs with 95% certainty and assume a probability of that event. The last one is tricky, but should be doable by looking into statistics or pure logic. If something has a very low probability of happening in the next 10 years, why bother at all with this risk. Then just do the math and come up with a specific number for the EF.

The conclusion would be that someone still living at his parents, no kids, no wife, a profession where one could easily find something new the very next day etc. might not need an EF at all. Another case would be someone with young kids, old house with a high mortgage, old car that might die any day, wife not working, very riskful job (could be over every day), some health problems. Such a person might need way more than 6-12x monthly expenses as an EF.

What do you think about this approach?

4 Likes

Basically what I am doing, with a rather less “scientific” approach

Right now I am at 20k, since my wife has a stable income now which would cover our bare expenses quite well, I will reduce it to about 5-10k (no car, only the franchise of the health insurance would be a biggish deal.

And even if losing the job or being invalid, there is still some income via ALV/AHV/2nd pillar.

The good part about living well below ones means is that it gives you so much flexibility (and not getting used to some bullshit luxuries → see hedonic adaptation).

2 Likes

Nothing much to add as you pretty much nailed it.
The only extra I personally think is of emergency duration and possibility to eliminate cash to cover EF:

  • job loss → recurring monthly expenses, then credit card limit for 1month + RAV later, then margin loan or portfolio sell. If you have good spouse or family to help, then total EF = 0, 1 or max 2 month worth expenses in cash imho.
  • major health issue → morbid to think of worst case, but since we are capped at 10% by health insurance + franchise, so then 100k total? Not worth to plan for such event for EF in cash, so margin loan + portfolio sell, unless clear condition is known.
  • investment → that should be planned and not emergency.

Rest is personal preference depending in situation imho.

2 Likes

I think one should also consider the size of his investment portfolio. E.g. I don’t have an emergency fund anymore and finance any emergency through a margin loan. And in the worst case, if I can’t pay back the margin loan with my savings in 3-4 months, I sell part of my assets.

The opportunity costs of 3-6 months expenses are way too high for me personally.

3 Likes

It‘s capped though. After your franchise (CHF 300-2500), you need only to pay for a maximum of CHF 700. So worst case in any given year is CHF 1000-3200 (depending on your franchise). Doesn‘t matter if it costs a couple of 100k for the health insurance company. Those 10% after your franchise only apply till you surpass 7k in costs, afterwards it‘s 0%.

The 10% are on costs that exceed the franchise (art. 64 KVG), meaning that the maximum amount of cost share you could have to pay also depends on the franchise.
Ex. annual health costs : 5000

  • Franchise = 300 : 300 + (5000-300)*10% = 300 + 470 = 770 CHF
  • Franchise = 2500 : 2500 + (5000-2500)*10% = 2500 + 250 = 2750 CHF

Max cost share for franchise = 300 is at 7300 CHF of total health costs, for franchise = 2500 it is at 9500 CHF. After that, it eventually falls down to 0%.