\r\n\tThe goal of building wealth has turned many into penny-pinchers. As long as it doesn’t harm health or social connections, there’s nothing wrong with advanced frugality\u2014it could be worse habits.\r\n<\/p>\r\n
\r\n\tIt\u2019s also striking that the same hardened savers often become sentimental in other areas and accept opportunity costs for the sake of “peace of mind.” This is the case with the “emergency fund,” which is often quite substantial. We aim to explore its sensibility here.\r\n<\/p>\r\n
\r\n\tLeaving large sums of money\u2014regardless of purpose\u2014sitting in a checking or savings account causes opportunity costs. By consciously not investing this money in stocks, ETFs, gold, or Bitcoin, one knowingly forgoes very likely additional returns<\/em>.\r\n<\/p>\r\n \r\n\tThe intention behind this is clear: to avoid the hypothetical overlap of an unexpected, unavoidable payment obligation with temporarily depressed prices in one\u2019s investments.\r\n<\/p>\r\n \r\n\tAfter all, one would then have to reluctantly sell stocks, gold, ETFs, or Bitcoin at unfavorable prices to meet this sudden financial obligation.\r\n<\/p>\r\n \r\n\tBut is that really necessary? And if so, is partially liquidating investments more or less costly than the often indefinite holding of sometimes quite large cash reserves with the accompanying forfeited returns?\r\n<\/p>\r\n\r\n \r\n\t\tMany proponents of emergency funds share the belief that sudden, unexpected costs, which apparently must also be paid immediately or within a few days, are realistic threats.\r\n\t<\/p>\r\n\t \r\n\t\tBut how likely\u2014or even possible\u2014are such immediately payable bills that cannot wait until the next paycheck?\r\n\t<\/p>\r\n\t \r\n\t\tIn typical transactions, including those involving private individuals, payment deadlines are usually around two weeks or longer. It\u2019s also customary for creditors not to send a reminder immediately on day 14 but a few days later.\r\n\t<\/p>\r\n\t \r\n\t\tFor instance, the EU Directive on Late Payment in Commercial Transactions sets payment terms of 60 or 30 days for invoices between companies or between companies and public institutions.\r\n\t<\/p>\r\n\t \r\n\t\tThis primarily aims to address chronically late-paying public institutions and relieve companies. Yet, 30 days\u2014or even up to 60 days between businesses\u2014are allowed, not three or seven.\r\n\t<\/p>\r\n\t \r\n\t\tFor consumers, the statutory payment term is 30 days unless otherwise agreed. The creditor can shorten this to two weeks, but even then, a reminder must typically precede further action. It\u2019s even customary to issue up to three reminders before taking legal action.\r\n\t<\/p>\r\n\t \r\n\t\tOverly aggressive or short payment deadlines tend to meet with disapproval in court, as a certain level of proportionality and consideration of interests is expected.\r\n\t<\/p>\r\n\t \r\n\t\tMoreover, creditors are usually open to proactive communication from debtors and almost always grant payment deferrals. After all, creditors cannot be 100% certain they\u2019ll recover the debt, and a request for a few weeks\u2019 grace demonstrates responsibility and acknowledges the debt.\r\n\t<\/p>\r\n<\/section>\r\n\r\n \r\n\t\tWhat situations might require immediate access to three-figure or higher amounts of money?\r\n\t<\/p>\r\n\t \r\n\t\tIf a washing machine breaks, costs of \u20ac350 including shipping are typical for a non-brand appliance. This hardly justifies holding several thousand or even tens of thousands of euros in reserve. Additionally, one could visit a laundromat once or twice until the next paycheck arrives. For child-free households, collecting dirty laundry and visiting the laundromat once may suffice.\r\n\t<\/p>\r\n\t \r\n\t\tDishwasher: Handwash dishes for a while.\r\n\t<\/p>\r\n\t \r\n\t\tStove: Use installment payments, payment deferrals, overdraft credit, or order and prepare cold meals temporarily.\r\n\t<\/p>\r\n\t \r\n\t\tThe costs here are typically modest, or a payment plan or financing agreement can be arranged with the retailer. If not, a short-term overdraft might be an option.\r\n\t<\/p>\r\n\t \r\n\t\tEven veterinary treatments usually cost only a few hundred euros. Payment deferrals or installments can often be arranged with vets. It\u2019s advisable to discuss this before treatment.\r\n\t<\/p>\r\n\t \r\n\t\tIn these cases, arranging a payment deferral with creditors should be simple, as the situation is neither unusual nor intentionally created, and the debtor (the state) is solvent, making default practically impossible.\r\n\t<\/p>\r\n\t \r\n\t\tRenters aren\u2019t responsible for such costs, and homeowners don\u2019t usually have to pay immediately. In these cases, an emergency fund would have to be very large and thus cause significant opportunity costs.\r\n\t<\/p>\r\n\t \r\n\t\tIf the next paycheck isn\u2019t sufficient, liquidating investments might be considered. This should yield better long-term returns than leaving tens of thousands of euros idle in savings accounts. Alternatively, banks are usually willing to issue loans for such cases.\r\n\t<\/p>\r\n\t \r\n\t\tAdditionally, homeowners typically save for property maintenance. These funds could also be invested instead of sitting in checking or savings accounts.\r\n\t<\/p>\r\n<\/section>\r\n\r\n \r\n\t\tThose with investments should have no major problems securing short-term loans or using overdraft facilities. Even without investments, but with regular income, this should be possible.\r\n\t<\/p>\r\n\t \r\n\t\tFans of emergency funds seem to assume no one will lend them money in an emergency, despite having income and likely existing investments. This is often an exaggerated fear or stems from the desire to always be self-reliant and not ask for credit.\r\n\t<\/p>\r\n\t \r\n\t\tHowever, if the goal is to avoid liquidating investments, a loan can be economically reasonable. Banks are likely to agree if repayment capacity is evident.\r\n\t<\/p>\r\n\t \r\n\t\tThis proud independence or fear of accountability can be expensive, especially with large emergency funds that sit unused for years. This approach should be reconsidered.\r\n\t<\/p>\r\n<\/section>\r\n\r\n \r\n\t\tAssuming regular income and existing investments in real estate, stocks, gold, etc., we consider an emergency fund of around \u20ac1,000 per household member and perhaps \u20ac300 per pet to be sufficient, given opportunity costs.\r\n\t<\/p>\r\n\t \r\n\t\tThe reasoning is this: Failing to pay \u20ac300 within two weeks might raise eyebrows and hinder creditor cooperation. However, needing some leeway for thousands of euros is not unusual and shouldn\u2019t lead to legal action or other consequences within a few weeks.\r\n\t<\/p>\r\n<\/section>\r\n\r\n \r\n\t\tGold prices have risen steadily over the past decade from around \u20ac1,000 to \u20ac2,500 per ounce. Due to this consistent yet significant growth and its detachment from stock markets, it\u2019s not unreasonable to consider gold a better savings account.\r\n\t<\/p>\r\n\t \r\n\t\tGold could be held virtually as a Gold ETC rather than physically, allowing for quick conversion to cash. While gold\u2019s value appreciation is not as perfectly stable as savings accounts, higher returns than the approximately 3% offered by savings accounts in late 2024 are to be expected.\r\n\t<\/p>\r\n\t \r\n\t\tAdditionally, a significant drop in gold prices is unlikely. At worst, gold might move sideways for a time, making savings accounts retrospectively slightly better in certain periods.\r\n\t<\/p>\r\n<\/section>\r\n\r\n\r\n","protected":false},"excerpt":{"rendered":" The goal of building wealth has turned many into penny-pinchers. As long as it doesn’t harm health or social connections, […]<\/p>\n","protected":false},"author":16,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_locale":"en_US","_original_post":"https:\/\/meine-renditeimmobilie.de\/?p=9252","footnotes":""},"categories":[167],"tags":[],"post_folder":[226],"class_list":["post-9653","post","type-post","status-publish","format-standard","hentry","category-wealth-creation","en-US"],"_links":{"self":[{"href":"https:\/\/meine-renditeimmobilie.de\/wp-json\/wp\/v2\/posts\/9653","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/meine-renditeimmobilie.de\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/meine-renditeimmobilie.de\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/meine-renditeimmobilie.de\/wp-json\/wp\/v2\/users\/16"}],"replies":[{"embeddable":true,"href":"https:\/\/meine-renditeimmobilie.de\/wp-json\/wp\/v2\/comments?post=9653"}],"version-history":[{"count":1,"href":"https:\/\/meine-renditeimmobilie.de\/wp-json\/wp\/v2\/posts\/9653\/revisions"}],"predecessor-version":[{"id":9655,"href":"https:\/\/meine-renditeimmobilie.de\/wp-json\/wp\/v2\/posts\/9653\/revisions\/9655"}],"wp:attachment":[{"href":"https:\/\/meine-renditeimmobilie.de\/wp-json\/wp\/v2\/media?parent=9653"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/meine-renditeimmobilie.de\/wp-json\/wp\/v2\/categories?post=9653"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/meine-renditeimmobilie.de\/wp-json\/wp\/v2\/tags?post=9653"},{"taxonomy":"post_folder","embeddable":true,"href":"https:\/\/meine-renditeimmobilie.de\/wp-json\/wp\/v2\/post_folder?post=9653"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}How Quickly Must Money Be Available in Emergencies in Germany?<\/h2>\r\n\t
Potential Situations Where “Immediate” Money Is Needed<\/h2>\r\n\t
Classic Example: Washing Machine Breakdown (or Dishwasher, Stove)<\/h3>\r\n\t
Car, Bicycle, PC, or Smartphone Breakdown<\/h3>\r\n\t
Veterinarian<\/h3>\r\n\t
Waiting Period for Initial State or Social Security Benefits<\/h3>\r\n\t
Broken Heating or Similar in Homeownership<\/h3>\r\n\t
Overdraft or Other Short-Term Credit Instead of Emergency Fund<\/h2>\r\n\t
Appropriate Size of an “Emergency Fund”<\/h2>\r\n\t
Gold – The New Savings Account?<\/h2>\r\n\t