Emergency Fund (Notgroschen)
A reserve for unexpected expenses — priority #1 before any investments.
Why This Is Critical for Immigrants
The standard advice is "3–6 months of expenses." For immigrants, the context is different:
- No family network — parents can't lend money in a couple of days
- No social capital — connections that help with jobs aren't built yet
- Limited system knowledge — harder to quickly find solutions in a crisis
- Possible language barriers — make emergency job hunting harder
An emergency fund is not paranoia. It's a rational response to objectively higher vulnerability in the first years. When the foundation is built — you can think about investments.
How Much You Need: Phase Approach
| Phase | Recommendation | Logic |
|---|---|---|
| First months (0–6 mo) | €2,000–5,000 quickly | Minimal protection while settling in |
| Stabilization (6–24 mo) | 4–6 months of expenses | Standard protection + time for job search |
| After 2 years | 3–6 months of expenses | Already have ALG I, system understanding, connections |
Calculation Example
Expenses €2,500/month:
- Quick protection: €3,000–5,000
- Full cushion: €10,000–15,000
Who Needs More
| Factor | Why It Increases the Need |
|---|---|
| Sole breadwinner | No second income as backup |
| Unstable residence permit status | Additional risks |
| Rare specialization | Longer job search |
| Freelance | No ALG I, unpredictable income |
| Children | Expenses can't be quickly reduced |
Where to Keep It
| Option | Suitable? | Why |
|---|---|---|
| Tagesgeld | ✅ Yes | Instant access, some interest |
| Girokonto | ⚠️ Partially | Too easy to spend |
| Festgeld | ❌ No | Money is locked |
| ETF/stocks | ❌ No | May drop exactly when needed |
| Cash at home | ❌ No | Theft risk, no interest |
Keep the cushion in a separate Tagesgeld account. Psychologically harder to spend when money is "out of sight."
Savings Priority
1. Emergency cushion (€1,000–2,000)
↓
2. Pay off expensive debt (>5% annual)
↓
3. Full cushion (4–6 months)
↓
4. Investing
Important: don't skip to investing before the cushion is built. This is a common mistake — wanting to "not miss market growth," but losing a job without reserves costs more.
When to Use
✅ Yes:
- Income loss
- Urgent repair (fridge broke, not "want a new one")
- Unexpected medical expenses
- Unexpected mandatory expenses
❌ No:
- Vacation (this is a separate budget item)
- New phone (plan ahead)
- Sales ("such an opportunity!")
- "Good investment" (if it's good now, it'll be good in a month)
Replenishing the cushion is priority over investments. Until the reserve is restored, you're vulnerable again.
FAQ
Not legal or financial advice.
I have €3,000 saved. Should I start investing or build the emergency fund first?
Priority: emergency fund. €3,000 covers 1–1.5 months of expenses for an average family in Germany. If you lose your job, that money runs out before the first ALG I (unemployment benefit) payment arrives (processing takes 2–4 weeks). Average ETF returns are 7–8% per year — on €3,000 that's ~€210–240/year. The cost of forced selling ETFs at a loss during a crisis can far exceed that amount. Sequence: (1) quick cushion €2,000–5,000; (2) pay off debt above 5%; (3) full cushion 4–6 months; (4) investing.
Tagesgeld gives 2.3%, but inflation is 2.5%. Am I losing money?
Technically yes — real returns are negative. But an emergency fund is insurance, not an investment. Its purpose is to be instantly accessible and not lose nominal value. Alternatives are worse: ETFs can drop 20–30% exactly when you need the money; Festgeld locks access; cash at home isn't protected from theft and also loses to inflation. Losing 0.2% per year on €15,000 is €30/year. The cost of an emergency overdraft (Dispokredit ~10%) without a cushion: €125/month on €15,000.
We both work. Do we need separate emergency funds?
A shared fund is sufficient if both incomes are stable and the family operates as a financial unit. Size: 4–6 months of shared family expenses. Separate funds make sense if: (1) one partner freelances with unstable income; (2) the relationship isn't legally formalized (no joint account, separate finances); (3) one partner plans a career change or retraining. Hybrid approach: shared cushion for 3 months + individual reserve of 1–2 months for each.
I got fired. How does the emergency fund interact with ALG I?
ALG I (Arbeitslosengeld I) does not depend on your savings — it's an insurance benefit, not social assistance. Amount: 60% of net (67% with children), duration depends on tenure and age (6–24 months) [3]. The cushion covers the gap: from termination to the first ALG I payment takes 2–4 weeks (application processing). If you quit voluntarily — Sperrzeit (blocking period) of 12 weeks with no payments. In that case, the cushion covers 3 months entirely. ALG II (Bürgergeld) is different: savings are considered, but the threshold is high (€40,000 per person, protected assets Schonvermögen).
Emergency fund is built. Can I keep part in Festgeld for a higher rate?
A "ladder" approach (Festgeld-Leiter, fixed-deposit ladder) is acceptable for part of the fund, provided instant access is maintained. Example: €15,000 fund = €5,000 in Tagesgeld (instant access) + €5,000 in 6-month Festgeld + €5,000 in 12-month Festgeld. Rate difference: Tagesgeld ~2.3%, Festgeld 6 months ~2.8%, 12 months ~3.0%. On €15,000 that's an extra ~€50–70/year. Risk: if a crisis requires the full amount immediately, Festgeld is inaccessible until maturity (early termination is usually impossible or forfeits interest). For the first 2 years in Germany — 100% Tagesgeld is more reliable.