How to protect an emergency fund against inflation?

I have ~12 months of living expenses in cash, as a an emergency fund, on a bank account with 0% interest rate. I want to protect it against inflation.

In the US, my reflex would be to invest my emergency fund in TIPS or money markets ETFs. But I don’t want to invest in USD due to the currency risk.
I’m looking for a liquid investment vehicle that tracks inflation. What should I invest in?

So far I considered:

  • Stocks ETFs: too volatile. I don’t want to be forced to sell at a loss if I need to access my emergency fund if I loose my job and/or we happen to be in a recession.
  • Real estate: too expensive, I only have ~50kUSD in my emergency fund
  • Govt bonds: Vanguard has Euro-bonds ETFs, like VETA/VETY. Contrary to a few years ago where coupon used to be negative (causing me to stash some of my money in cash instead of diversifying in bonds), coupon is even positive these days, at 1.7%. But the price of VETA/VETY is too volatile for my purpose: for example, VETA lost 12% over the past 12 months, at a time where inflation was 6% and should have pushed its price up.
  • Savings account: banks currently offer 1% interest rates. With inflation at 6%, it seems like a poor vehicle for my emergency fund.
  • a previous suggested commodities, based on this article: But we still have the currency risk and the volatility in the price.

Running out of ideas here… any suggestion?

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Does your emergency fund really need to be that large? Would it make much of a difference if it was only 11 months? If not allocate some of that money to more risky assets.That could help to counter inflation (at least on average).

You could also accept that having highly stable, non-risky assets has an associated cost. You could pay that cost from other income.

For an actual solution: Could you hedge the TIPS?

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What about converting your USD to CHF ?
Sure you won’t earn any interest at the end, but it seems to me that CHF is still a strong currency.


An emergency fund is insurance, I would simply fund it more to cover the same amount of my expenses as they grow.

It’s the portfolio as a whole that I would want to protect against inflation. The emergency fund should be only a small fraction of it. Stocks, gold, other commodities, real estate or collectibles are what I would use to hedge against inflation.


If you say your emergency fund is X months of living expenses, it should grow with X, so with inflation and lifestyle inflation. And it should also shrink if you can spend less.

An emergency fund should simply not be invested, cash is the only way to keep it liquid enough to cover you in case of emergency. Anything else and you are reducing your capacity to handle an emergency.

If you are worried about the returns of your emergency fund, you are maybe too conservative with it and you can consider reducing it.


Keep it in CHF.

An ad hoc margin loan at IBKR can be your backup, in case your 12-months EF savings are not sufficient for an E that might occur.

And where is the inflation of 6% that you mention?
CH CPI numbers are 3.4% end of June.


Wow, what great input- thanks for that, I love the point of views you’re sharing.

Have 31 kCHF in my emergency fund at present. My living expenses in the past 3 years have been 18kSEK / month = 1.8kCHF / month. That’s 17 months of expenses in cash, probably too much indeed. Thanks for catching this one.

Dbu: The 6% inflation figure is for Swedish crowns (SEK). I live in Sweden, but lived in CH before and may return to CH in the mid-term. Accordingly, I kept my emergency fund in CHF and much of my CHF-quoted investments when in moved to Sweden but diversified in ETFs quoted and invested in SEK/EUR.

Based on your collective input, I will:

  • reduce my emergency fund to 12 months, so 22kCHF, about 10% of my net worth. So inflation will only eat me away at 10% of 2% (Switzerland) - 6% (Sweden) = 0.2%-0.6%. That’s an acceptable price to pay for safety in the worse-case scenario.
  • keep the emergency fund in a CHF-quoted savings account: no price fluctuation, no liquidity risk (baring a systemic banking crisis), no risk of broker or provider failure. There is an FX risk if the CHF crashes, but history suggests that CHF is more solid than SEK during crises. And I have a sizable portion of my portfolio in SEK if the CHF crashes.
  • replenish it every year based on how inflation drives my expenses up
  • invest the difference in my portfolio

Thanks again.

Long term return should be the same as if you kept a savings account in SEK (interest rate parity). If your spending is in SEK might be smarter to avoid the short term fluctuation (remember 2015?).

Many countries provide savings account with greater interests than the risk free rate as well, or with inflation protection, Sweden might have those (Switzerland doesn’t, except for the time when bank were giving out 0% interests while the risk free rate was negative).


If you find a way to grow returns in the order of magnitude of inflation with about zero risk, while preserving the liquidity (same day availability/ 10 days in case of a bill) then please tell me :slight_smile:

I think the nature of the emergency fund of always readily available cash prevents any sort of growing returns on it. Besides not having one / relying on a loan in the event of need.