Do I need an 'emergency savings account ' in Switzerland?
Depending on how much you earn, and how much of your income you spend, saving some of your Swiss wages may not always be easy. But there is a good reason why you should try.
If you have taken out all the obligatory and supplemental insurance policies in Switzerland, you are probably covered for all kinds of expected and unexpected ‘disasters’ that may come your way.
Aside from the obligatory health insurance, accident insurance (if not covered by your employer), vehicle insurance, as well as fire and natural disasters insurance (mandatory in 19 cantons), you may have taken out other protection policies as well.
READ ALSO: What insurance is obligatory in Switzerland?
For instance, many people in Switzerland believe in the ‘better safe than sorry’ principle, and have taken out supplemental health insurance, legal protection insurance, and personal liability insurance, among others.
With all that, do you still need to put ‘emergency’ money aside?
The Swiss generally like to be prepared for all kinds of ‘disasters’; a proof of this vigilance is the ubiquitousness of bomb shelters. Though Switzerland has not been invaded in centuries, the spirit of being ready, just in case, still prevails.
READ ALSO: What does Swiss government want you to know about bomb shelters?
But while you will hopefully never have to use your fallout shelter, chances are that at one time or another you will need extra money for other ‘emergencies.’
According to Moneyland consumer platform, “an emergency fund is an amount of money that you set aside for financial emergencies and unforeseeable expenses. This money is only used when you have to cover high, unexpected costs within a short period of time.
For instance, if you need major dental work (and don’t have a comprehensive dental insurance, which most people in Switzerland don’t), this could cost several thousand francs — or tens of thousands, in extreme situations.
Or perhaps you are a homeowner and must replace your broken appliances or do any expensive repair work on your property (in some cases, such as renovation, you can deduct the cost from your taxes, but not for repairs).
There may also be other (uninsured) family emergencies when you will have to spend a significant amount of money — all of which means it is always a good idea to have some funds set aside.
"Having an emergency reserve is important because it protects you from getting into debt," Moneyland said.
“Your savings enable you to deal with financial emergencies without having to get a personal loan or carry a negative balance on your credit card. That is beneficial because loans are expensive."
How much money should you keep in your emergency fund?
This, of course, depends on your income.
However, Moneyland’s financial experts recommend that the sum should be equivalent to between three and six times the amount of money needed to cover your monthly budget.
“That means that if your monthly budget is 4,000 francs, then you should have between 12,000 and 24,000 francs in your emergency fund."
A lot also depends on your personal circumstances, according to Moneyland.
If, for instance, you live alone and your rent is reasonable, "you may well get by with a smaller emergency fund than if you have a family and own your home."
And "if you are self-employed, you generally need a bigger emergency fund than an employee."
Where should you keep this money?
Obviously, these funds must be easily accessible at all times, so you should definitely not place them in long-term accounts where you would have to pay fees for early withdrawal.
Therefore, it makes most sense to keep it in the savings account from which you can withdraw money easily without penalties.
Another possibility is to keep cash at home — in a safe deposit box, rather than under your mattress.
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If you have taken out all the obligatory and supplemental insurance policies in Switzerland, you are probably covered for all kinds of expected and unexpected ‘disasters’ that may come your way.
Aside from the obligatory health insurance, accident insurance (if not covered by your employer), vehicle insurance, as well as fire and natural disasters insurance (mandatory in 19 cantons), you may have taken out other protection policies as well.
READ ALSO: What insurance is obligatory in Switzerland?
For instance, many people in Switzerland believe in the ‘better safe than sorry’ principle, and have taken out supplemental health insurance, legal protection insurance, and personal liability insurance, among others.
With all that, do you still need to put ‘emergency’ money aside?
The Swiss generally like to be prepared for all kinds of ‘disasters’; a proof of this vigilance is the ubiquitousness of bomb shelters. Though Switzerland has not been invaded in centuries, the spirit of being ready, just in case, still prevails.
READ ALSO: What does Swiss government want you to know about bomb shelters?
But while you will hopefully never have to use your fallout shelter, chances are that at one time or another you will need extra money for other ‘emergencies.’
According to Moneyland consumer platform, “an emergency fund is an amount of money that you set aside for financial emergencies and unforeseeable expenses. This money is only used when you have to cover high, unexpected costs within a short period of time.
For instance, if you need major dental work (and don’t have a comprehensive dental insurance, which most people in Switzerland don’t), this could cost several thousand francs — or tens of thousands, in extreme situations.
Or perhaps you are a homeowner and must replace your broken appliances or do any expensive repair work on your property (in some cases, such as renovation, you can deduct the cost from your taxes, but not for repairs).
There may also be other (uninsured) family emergencies when you will have to spend a significant amount of money — all of which means it is always a good idea to have some funds set aside.
"Having an emergency reserve is important because it protects you from getting into debt," Moneyland said.
“Your savings enable you to deal with financial emergencies without having to get a personal loan or carry a negative balance on your credit card. That is beneficial because loans are expensive."
How much money should you keep in your emergency fund?
This, of course, depends on your income.
However, Moneyland’s financial experts recommend that the sum should be equivalent to between three and six times the amount of money needed to cover your monthly budget.
“That means that if your monthly budget is 4,000 francs, then you should have between 12,000 and 24,000 francs in your emergency fund."
A lot also depends on your personal circumstances, according to Moneyland.
If, for instance, you live alone and your rent is reasonable, "you may well get by with a smaller emergency fund than if you have a family and own your home."
And "if you are self-employed, you generally need a bigger emergency fund than an employee."
Where should you keep this money?
Obviously, these funds must be easily accessible at all times, so you should definitely not place them in long-term accounts where you would have to pay fees for early withdrawal.
Therefore, it makes most sense to keep it in the savings account from which you can withdraw money easily without penalties.
Another possibility is to keep cash at home — in a safe deposit box, rather than under your mattress.
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