Are those 60 days after the contract ends? So possibly 5 months after you decide to quit you’ll get the money? Or within the notice period?
Either way, quiting a job without a new offer is madness.
Note: 60 Working days = 3 months.
Of course after the contract ends…
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Good to know. One reason more to never quit before you signed a new job offer.
You have as well 5 days of penalty on the first month of unemployment, even if you were fired and not quit yourself. So the first paycheck from unemployment can be quit low (70% - 5 days).
If you have broke up with the girlfriend at the same time, need to rent a new flat and so on, it can become a bit rocky for a couple of month. Not meaning that you need to stash 1 years worth of cash, but talking by experience, things can get pretty tight quickly 
Or worse, you can became a father just before/during you’re fired from your job… (and a piece of advice : NEVER EVER think you are guaranteed in a job. Everyone is replaceable. Everyone.)
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Interactive Brokers margin loan is my back up emergency fund. CHF interest rate 1.5%.
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Some are not.
They might get replaced anyways.
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Beware ! The penatly days highly depends on your personnal situation and your last income. You can have more than 5 days of penalty… I know it unfortunately…
Article 18 LACI/AVIG
Entitlement to benefit begins after a waiting period of five days of controlled unemployment. For persons who do not have a maintenance obligation towards children under the age of 25, the waiting period extends to:
10 days for an insured income of between 60 001 and 90 000 francs;
15 days for an insured income of between 90 001 and 125 000 francs;
20 days for an insured income of more than 125 000 francs.
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They might get laid off anyway, with no replacement.
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To continue in the same line of thinking: the company might go bust…
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True! I forgot about that, but since you point it out I remember having 15 days penalty back in 2011 that hurt me a lot.
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Sorry to add to the gloom and doom feeling after @Neville and @mabi
Agree 100% with @Strabor and other early replies in the topic: The overall insurance system in CH is good, but there is a weakness = when the workers themselves are the weak points. Not a judgment of character from my part, but that’s the way the employers and insurers will see you.
Most of us on the road to FIRE are highly efficient, detail-oriented, high-income (often office) workers. Exceptions apply and some may get involved in high risk sporting activities or in a car accident, but the biggest risk of disability is most likely depression or burnout. In this case the IV/AI disability insurance is the toughest: It takes ages (often > 2 years), many expertises and counter-expertises, and a tough legal battle to get the disability recognised, even more so after the last Swiss votes, referendums and law revisions.
In short, the IV/AI disability insurance is good for the classic accident / professional accident, but most office workers are more at risk of the mental illness kind, and that’s where the gap widens a bit more.
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What I meant to say is this: never think that you can predict what a company’s management is going to do, and in accordance, never overestimate your own importance to them. Pressure to save money and have good numbers in the annual report can be huge.
I have seen it so often: people are let go just to save money in the short term even though the company will suffer from it in the mid term.
This is so true. Our social system needs reforms.
Now as for the original question: is an emergency fund necessary? – I don’t think there’s a generic answer. For example, when my employer lets people go, it is usually in (huge) waves and people are notified years in advance. So there’s plenty of time to prepare for the day and stash away a fund.
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Most employees also have a notice period of 3+ months. I save enough so that that money alone is enough for 3-6 months.
Then there is unemployment insurance and the 1.5% margin loan at IB.
So I don’t see the need for an emergency fund. If I change employer I’d probably save up a small emergency fund in case it doesn’t work out.
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My contract, and I’m willing to bet most of them, includes a reservation in case of heavy fault or fraudulent behavior from the employee. Regardless of the way we perform, an employer could try to argue that immediate termination without compensation is warranted. The chances for it to hold in court are very low but that would trigger delays and potential legal fees that I’d rather be able to cover than not.
I’d not consider all employers as likely to try to go for such actions, but some are. If you feel that yours could try and play it backwards on you (they need to both have ill intentions AND not be smart enough to realize that it would backfire on them - but some are that stupid/ill-intended), then that’s something I’d take into account when considering how much cash I need on hand in case of an emergency.
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As said then there is still the option to sell shares or take a margin loan from IB.
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Yes, I don’t have an emergency fund for the following points:
- Notice period (heavy fault is rare in Switzerland)
- Unemployment
- Credit card
- margin loan
- sell shares
- Except rent, you can delay for 15-30 days the payment of invoices with a low risk of penality.
You need to remember that an emergency fund reduces the returns.
I think it comes down to what you feel safe with. providing this feeling is just as important as providing actual financial safety.
those three months of salary are only a rule of thumb that has only limited application on the individual. just like the “100 minus age percent in stocks” rule for investment.
so ya, make reasonable assumptions on what you need as an emergency fund and do it!
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This. My life situation changed since I made this thread. To sum it up:
- I’m single.
- I don’t have kids.
- I have a very stable job. Only a total collapse of the finance sector could harm me as I am a top performer (best 10%).
- I don’t have a car, only using public transport.
- I have private liability, household, travel insurance etc. (everything covered).
- My parents have 2 flats in Bonsia and a house in Serbia. I can use it whenever I want. It’s right next to Sarajevo where you have great dentists that charge 10% of the Swiss prices.
- There aren’t really any sudden expenses as I have a budget and several accounts with standing orders to account for basically anything (even gifts, clothes etc.).
I have a 10k cash emergency fund in a Swiss bank, 10k limit on my credit card, margin account with IBKR. There is probably no point in even having those 10k cash.
I have been very conservative with my emergency fund. I have probably 6-7 months net salary in the bank (allocated to this category). With that I would have a twist on this question, especially for YNAB users. In addition to the emergency funds I have money allocated to all the various savings categories in YNAB (insurances, various taxes, non-emergency rainy day funds).
How would you see the need for an emergency buffer if many (but not all like rent or health insurance) of the annual expenses are already budgeted? In total I usually have about 9-10 months salary in the bank. It’s basically a significant portion of my net worth.
(Married, two kids, partner not working)
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I guess Nugget concluded it well. It depends how much you need in order to sleep well.
In my opinion you are a bit too optimistic. Things will pop up that you did not expect. Could be:
Loss of job (although you are super optimistic that this will not happen)
Ilness
Issue of a family member
Sudden dream (travel, education, product, etc.)
Costs related to your flat
This does not mean that 10k are not enough. Its just means that there could come up some unexpected higher costs. As long as you sleep well with 10k, I guess thats fine.
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