Beyond the Emergency Fund: Preparing for Economic Collapse

The following article is the third in a five-part series, Beyond the Emergency Fund. Previous posts discussed ways to store water for emergencies, and how to store food long term.

It’s hard for most Americans to imagine what a full economic collapse may look like. Unfortunately, many other countries are all-too familiar with periods of currency collapse. We’ve all heard stories of people toting a wheel-barrow full of money to stand in line for hours at a store to buy a loaf of bread.

When it comes to survival planning, most immediately think of food and water, and rightly so. But what happens when supplies run low, as they most assuredly will if order is not quickly restored? Our economic system would likely revert to a bartering system – people exchanging goods and services for other goods and services. The paper dollar, the accepted medium of exchange as we know it today, would be worthless.

The Value of a Dollar

I don’t want to steer this post too far into the political realm, but it’s difficult to fully avoid a mild political discussion when talking economics. I’ll just make one point related to the value of a dollar, and refer to you more in-depth discussions on currency valuations with a lot more information.

So where does the dollar get its value? It’s not backed by a real asset. It has no intrinsic value – it’s just paper. The dollar’s value is largely established by its supply, and that is controlled largely by the Federal Reserve, who manipulates the value of its currency by printing more of it, or sucking some of it out of the system. Think supply and demand for those little pieces of paper.

The more paper bills there are floating around, the less value each one has. Conversely, the fewer bills floating around, the more value each one has. Of course, there are many other factors to consider such as the value of other world currencies, imports and exports, etc.

What I presented in less than a paragraph is really a gross simplification of dollar valuation, but enough explanation to drive home the point that if things really hit the fan, holding those paper bills won’t be worth very much.

The Gold Rush

A few years ago, when many saw the coming collapse of the housing market and resulting drop in stocks (and the dollar), investors began turning their attention to precious metals – mostly gold. Demand for gold skyrocketed, leading to record prices. Those looking to profit from the gold rush snapped up gold in any form they could find – bullion, bars, certificates, even stock in mining companies – whose revenues were bound to increase thanks to this wave of demand.

Personally, I’ve never really viewed gold, or an precious metal, as an “investment.” I don’t watch the value of gold and silver with the idea I’d buy it, hold it, and later sell to make a profit. I think of metals as insurance – insurance against a collapse of the dollar. And I don’t like to own anything other than physical metal because I can see it, feel it and know where it is stored.

Gold or Silver?

Ask any ten investors or economists covering commodities where gold prices are headed, and you’ll probably get ten different variations of the same answer: higher or lower. Historically, when something is at an all-time high, it only has one direction to go. However, in the case of gold, it’s possible that the price could be driven even higher on more worries over the state of our economy.

U.S. gold five dollar 1987 by Kevin Dooley on FlickrSince I was a late adopter to the idea of buying gold, I’ve found it difficult to afford in even the smallest forms. Just last Friday, gold closed at $1,217.40. This price point makes buying something like a 1 oz American Eagle gold coin nearly impossible for the average person. If I had several thousand dollars in extra emergency funds, I might diversify some of that money by picking up a few gold coins. However, there are other options to consider.

Many collectors have now turned their attention to silver. At the end of 2005, silver was trading at around $8. Last Friday, it closed at just over $18, making it a more feasible investment for most of us. In terms of bartering potential, silver may be a better choice considering its lower price per ounce.

Imagine carrying a $1,200 gold coin to a butcher to buy meat for your family. Chances are he won’t be able to accept such a large denomination, and you wouldn’t really want $1,200 worth of beef. However, you could easily hand over a couple silver dollars you’d collected over the years for several pounds of meat.

An episode of the show The Colony (one of the only television shows I still watch regularly) emphasized this idea of bartering. If you are unfamiliar with the Discover Channel show, here’s a two-sentence synopsis. Colonists are dropped into a post-apocalyptic scenario with only a few basic staples. They must scavenge the area for shelter, food, water and other survival tools, while fending off looters and surviving the brutal elements.

In a recent episode, a boat belonging to other survivors comes floating down a canal near the colonists’ shelter. The men are looking to trade goods with the colonists. They successfully negotiate the exchange of a number of items they had collected (vodka, sugar, medical supplies, etc.) for a generator, fresh produce, soap and other goods. Imagine if the colonists had a few coins to trade. If the traders were more interested in collecting wealth, the colonists could have picked up those same supplies while keeping their own goods by trading their coins instead.

How to Buy Silver

Since gold’s price is too high for me to buy in increments, I’ve turned my attention to collecting silver pieces. Interestingly, previously circulated American coins contained significant amounts of silver, but you have to know what to look for, because composition of the same coin could have changed from one year to the next.

U.S. Silver dollar uncirculated by Kevin Dooley on FlickrFor instance, the 1964 Kennedy half-dollar is popular with many coin collectors because it contains 90% silver, and 10% copper. At 12.5 grams, the silver composition of one Kennedy half-dollar is worth about $6.55. The site, Coinflation, offers a number of melt value charts and calculators that might be of interest.

Even something as small as a 1942-1945 U.S. nickel is worth over $1.00, because its composition includes less nickel and more silver than in other years. Nickel was more valuable for use in the manufacturing of armor plating to support the war effort.

Coins may be purchased from collectors at coin shops or online. I strongly suggest fully investigating any online vendor, as the increased demand for gold and silver has also increased the number of scammers. A site like eBay might be a decent online site to purchase from, as sellers have been vetted by the community itself.

Personally, I prefer to buy from face-to-face sellers at places like coin stores, jewelers and pawn shops. Keep in mind, you’ll probably pay a little more than the price per ounce because those willing to sell are probably looking to make a profit.

One trick for finding Kennedy half-dollars, without paying a premium to a collector, is to ask your local bank if you can buy a couple rolls of half-dollars, or “halves,” (they are $10.00 per roll). Technically, they don’t have to sell to you, and I probably wouldn’t go on the busiest day. However, if you go on a slow day and find a friendly teller, chances are you can trade in your paper money for a few rolls of halves.

Sort the coins and save any with significant silver composition, such as the 1964 Kennedy half-dollar (90% silver). Other halves minted up to 1970 included 40% silver, so they are worth hanging on to as well. Roll the remaining coins back up to return to the bank for cash, or drop them in a Coinstar machine and opt for an gift card to avoid the fee.

Coins should be stored like any other valuables – in a safe in your home, or a safety deposit box at the bank. I don’t recommend converting all of your dollars to coins, but it does seem prudent to diversify a portion of your portfolio to coins, if not for the investment potential, as insurance for an economic collapse.

Ask the Reader: I’m a relative newbie to the coin collecting game. I’d love to hear from some of you who have been at it a while, or from others with questions. Maybe we can all help each other learn more about diversifying our emergency funds into coins to preserve some wealth in tough times.


  1. I prefer to stock up on other precious metals, like brass and lead.

    I do have a bit of silver floating around, but not a lot. When I started focusing on getting out of debt, end-of-the-world preparations were put on hold.

  2. Buying rolls to sort through is a TOTAL waste of time. The coins have been out of circulation for 45 years and the general population of coins has been picked pretty clean. remember bad money drives out good. Go to a local coin store, pay cash and don’t tell the proprietor your name; don’t ask don’t tell…

    • I’ve read online that most people only manage to find 1 or 2 halves worth saving out of every 20 rolls. Apparently, the suggested method is to find a small-town bank with old rolls on hand. Easier said than done, and as you say, it may not be worth the effort. Although I like the idea of picking up silver without having to pay more than face value of the coin.

      • I live in the land of small banks- and silver dollar keepers. I think you are better off in the city where old people turn in their change. I haven’t run across one good old coin since I moved here six years ago. I used to run across them once a month when I lived in Phoenix.

  3. If there is a collapse that causes the dollar to be worthless, why do we imagine gold or silver would still have value. I think it is unlikely, at least in the immediate foreseeable
    future, a situation where the dollar is worthless but there is some other economy in place that still places a value on gold. I guess I think the situation would have to so bad that only tangible goods have value.

    • “I guess I think the situation would have to so bad that only tangible goods have value.”

      That’s the scenario to plan for as a coin collector. I happen to find coins beautiful, and am enjoying learning more about them as a hobby as much as a play on dollar devaluation. But, if it got to the point where only tangible goods had value, it would be helfpul to have some on hand for bartering.

  4. I tend to agree that it would be more useful to invest in some non-perishable items that would be useful to trade, if you’re going to invest at all.
    A few people might be willing to barter for metals, but more likely they’ll want to barter for things like liquor, soap, paper, tools, even batteries, flashlights and such.

  5. While I enjoy collecting coins, and do have one gold coin (which is beautiful), I agree with Cherie that other things would likely be of more value in the case of an economic collapse. Knowing how to *do* things is also likely to be very valuable (and is useful in good times as well).

  6. It seems to me that, now that the USA has gone to a fiat currency and the dollar is no longer tied to the value of gold or silver, both those metals have become commodities like any other commodity. That means the price follows the laws of supply and demand. It’s reasonable enough to buy or sell commodities on speculation, hoping for an upswing in price. But if I’m going to do that, I expect the increase in price to be tied to some increase in demand that is based on practical use and not on perceived value or hype. That’s not what I’m seeing right now.

    With most commodities, there’s going to be some kind of manufacturing or commerce based effect on demand, or else disruptions in supply and demand that will drive the commodity and futures prices. Recent examples include high amounts of new construction driving the price of concrete futures, the drop in pork product futures in response to the swine flu, and the way gas prices always rise just before a long weekend. I can’t see any such a trend supporting the increase in gold prices. Manufacturers aren’t increasing productivity or switching over technology in a way that requires more gold. Nor has there been any meaningful natural disaster affecting supply: gold mines aren’t blowing up or ceasing to exist. So I suspect the ongoing surge in the price of gold is a bubble: demand driving even higher levels of demand, but the demand isn’t backed by anything except the desire to own something of “value”. The rise in gold prices may have been due in part to an artificial expansion of the money supply brought on by cheap, easily available credit. Now that the money supply appears to be contracting because investors are less tolerant of investment banks and private equity firms taking irresponsible risks with their savings by deliberately making bad loans, people are migrating their investments into securities they believe are more stable. Hence the ongoing interest in gold. The trouble is, gold got bubbled during the artificial currency expansion, and the perception that it’s somehow a safe investment has kept the commodity price artificially high, and in fact it’s going higher and bubbling even worse.

    I don’t like it and I’m not buying gold myself at this point.

    There’s nothing wrong with buying in while the bubble is growing and hoping to make a quick profit and then get out, provided people understand what they’re doing and don’t believe they’re, say, investing for long-term income.

    There’s nothing wrong with buying, collecting, and enjoying a thing for its own sake. Some people just really like coins, and they want to own them, collect them, and periodically look at them. Others like Star Wars figurines or old books. Collecting is a legitimate hobby, and althoug I’m not a collector myself I’m told that the remote possibility of lucking out and being in the possession of, say, a rare comic book that can be sold for an obscene profit really adds spice. But none of the serious collectors I’ve ever talked to believes they’re investing in something where they might predictably make a profit. They’re just having fun with a hobby and most of them freely admit that they spend far more on their hobby than they expect to gain.

    The trouble with coins in a hyperinflation or deflation situation is, you can’t eat them.

  7. A couple of things to note here. As someone above pointed out, silver (and gold) are commodities affected by supply/demand. I don’t buy into it being a good replacement currency (or other metals) as silver demand is primarily driven by manufacturing utilization. If there is a collapse, manufacturing will probably crater and you demand will plummet as well. Your best bet would be to sell in the initial panic as people try to hoard precious metals under the belief that they are the new currency. I still believe trying to diversify into precious metals is a fundamentally flawed strategy. If you want to make them an investment, that’s fine, but don’t keep acquiring it hoping it will save you in the future. If nothing else, the prices are at an all time high now and you’ll just be giving away your own capital.

    I appreciate most of your posts, but I think the Beyond the Emergency Fund posts are going a little overboard. You can, and should, plan for a decent amount of emergencies. But preparing to be a survivalist is a little too extreme. Again, just my 2 cents.

    • I appreciate that feedback, Scott. The nice thing about survival prep is you can take it as far as you personally feel comfortable taking it. Some are comfortable buying a few extra cans of food and building a homemade first aid kit, while others are building cellars in their backyard and stocking with years of food.

      I’m not really advocating either extreme, but rather trying to get people to prepare to be more self-sufficient. Most people do very little to prepare beyond day-to-day life. That, I believe, is a mistake in any environment.

  8. I think that buying an ethanol still is the best investment you could make; or even a home wine making….that is a commodity far more valuable then any other in the event of la fin du monde….

  9. I think many people have become used to going to a 24 hour box store to pick up anything they need at any time. One of my coworkers recently remarked during carpool “I had to run to Walmart this morning because we ran out of toilet paper”. I’m thinking…how do you run out of this? Another lady said “I’m out of shampoo and laundry detergent”.

    I have year’s worth of those three items on hand, and feel most comfortable having about 3 month’s supply of food basics. I’ve been keeping track via a small calendar when I open a bar of soap, or finish a tube of toothpaste since the beginning of the year. I now know roughly how much stuff I go through in a given time period.

    What would happen if there was an interruption in our supply chain? I wonder how long most families would survive.

    • Rebecca – Right there with you 🙂
      Only I like about a year’s worth of food, for sure! Might get some interesting combinations towards the end of the year, but it would still be food 🙂 Of course, if others moved in because they didn’t have enough food, then there wouldn’t be a year’s worth…. so that’s why I keep a year’s worth for me – in case others need help.

      • I think I remember reading somewhere that the average box store/grocery store has about 3 days worth of inventory on hand to support the local population (obviously some things would go much faster). If that supply chain was interrupted, the shelves would be empty in no time, and as Rebecca mentions, so would her friend’s pantries.

        One thing we haven’t touched on much in this thread is the cost-saving benefits of stocking up on cyclical sale items when they are cheaper. If well-stocked, you can pull from your “store” at home rather than going back to the store to buy full-price items to replenish.

  10. This strikes me as way paranoid. I do not believe gold or silver to be worthwhile investments generally, compared to conservative diverse investment vehicles as well as cash. If everything collapses and we do end up living in a Mad Max world, my 50# bags of rice will be of far more use than gold.

  11. This whole thread is like the guy who goes to his broker and says “I’m so worried about my investments, I can’t sleep at night, tell me what to do.” The advisory says, “No, you tell me what to do, if you wan tot be all in gold, treasuries, Swiss Francs, Perth Mining certificates or convert to gold and out it in your mattress, so tell me what to do and I’ll do it, then you will sleep at night…(maybe)”

    People need to reach their own sleep level, but when people start talking about NATO troops rounding up people, time to fins another site to follow….

    • @Bob: Where was there a mention of troops rounding up people? Certainly not in my original post. I do like your comment about people finding their own sleep level. That was the gist of my reply to Scott above.

  12. If your talking a real emergency, what are the chances your bank is going to be open so you can get your coins out?

  13. In the above situations, to be debt free, and able to grow/harvest food, is the best way in my opinion. No need for money when we get down to the bare basics – food will be the barter. And maybe fish hooks and ammo for obtaining food 🙂 A good skinning knife and canning jars – wonder how hot I’d have to get the wood stove to can on it???
    Canning lids – remember when there was a shortage/rush on them one year due to a metal shortage for making them?

    • I have to side with Marci that my best defense would be self sufficiency. I think I’d prefer a cellar full of canning supplies, a sunny paid for yard, a stock of seeds and a shovel vs a pile of silver.

      That being said, my mom did grow up during WW2 in Poland and the Jews who had gold or other valuables were able to make safe passage out of the country a lot easier than the ones who did not. There is something to be said about having something valuable to trade. Since this happened just a generation ago, who’s to say it won’t happen again. We’ve been lucky so far.

  14. I have a ton of coin. Started collecting when I was ten. Inherited my grandfather’s “end of the world” collection. I enjoy them and leave them for a rainy day. They fluctuate in price, but not as much as you might think. It is illegal to melt US currency down.

    BUT if the economy gets to a melting point- I am in the same boat as most of your commenters. It was a different thing when I lived in China- or even Saudi Arabia. Those places still trade in gold and silver. We, simply, do not. Even wedding rings are down to 10kart (Overseas that is almost illegal).

    I think people like Glen Beck and Rush Limbaugh make tons of money off their “end of the world buy gold” advertisements. Fortunately, I have been through several ends of the world:
    Cuban Missal Crisis,Carter administration,Enron,Millennium,Election of Obama, Global warming. Your reaction is normal having children and the news that is broadcast 24/7. We bought silver bullion in the ’80’s. Fortunately, we found someone who would trade it for something we needed in the ’90’s.

    I think “the end of the world senerios” will come more frequently now that we have real mass communication.

    Buy your coins- but only if you enjoy collecting. I think you will have them for years to come! As long as you can sleep knowing you have several thousand sitting quietly in your basement. I do and occasionally wonder if this is a good time to sell!

    As far as rounding up people—your family is welcome at my farm in the middle of no where anytime:>) We live the ultimate “end of the world” place and have lots of city relatives who have enough to get here in a pinch (but have no intension of living here- EVER).

  15. I rather not guess at what would be valuable during an economic collapse – if you are really worried, I agree with marci, it’s time to start growing your own food and learning survival skills. Gasoline would probably be more of a commodity than silver or gold (at least it was during our 8 day city crash during Hurricane Ike).

  16. Very interesting thread. I tend to agree with stockpiling neccessities like food and water, but also keeping stockpiles of goods to use for bartering, I an concerned about what happens to people who have homes and they still owe the bank. With collapse of the economy what happens to people in not being able to pay mortgage…out on the street? or if banks close down, how would this situation pan out? Sorry, this is off the subject and I am so naive. I have seen the Mad Max movie, but it is so hard for me to comprehend it will come to that type of world. I lead a very sheltered life!

    • Margo, your question is a good one, and it reinforces our goal of paying off the mortgage early. With so many goals competing for our dollars, it does tend to make that goal a tough one to complete in a matter of years. However, I still believe it is worthwhile because being free of a mortgage means you can handle many more economic stresses than someone teetering on the edge just trying to scrape up enough to make a mortgage payment.

  17. Hello, this was an interesting post. Have a few of those half dollar coins, and was thinking about purchasing some gold coins as the budget allows. I am currently contributing the maximum 6% matched by the company to the 401k, do you think would it be prudent to lower that to 5% to free up cash to buy gold or silver? Thanks!

    • I’d personally keep investing in the 401k through the match – that’s free money, after all! With any extra/found cash, I’d consider picking up a few coins, but only after other basic prep materials are covered. As others have mentioned, it’s far more important to have basic stored necessities like water, food, survival tools, etc.

  18. You should check out Columnist Paul Farrel at He’s predicting the end. He says stock up on seed, fertilizer and guns. All the while being very pleased with himself on his Lazy Portfolios.

  19. If you are going to invest for the apocolypse, do yourself a favor and invest in 9mm bullets and 12 guage shotgun shells.

  20. While not a huge fan of this post, I do appreciate some of the preparedness stuff – the recent food one was great.

    Also, most people seem to like to label anyone who invests in gold a gold bug. There are plenty of perfectly good reasons to diversify into a precious metal(s), and I’d personally call anyone who is 100% in stocks a bit loony – I mean really, diversifying is not owning different colors of 1 asset class. I’d recommend people check out Harry Browne’s permanent portfolio for an interesting bit of asset diversification.

  21. Most dealers require you to buy a set of 10 gold coins. I bought my set from Monex (a while ago when it was trading around $865 per ounce) and I’m certainly happy with the return so far. I plan to sell this year, probably toward the end of the year. I certainly view gold as a bubble/flip opportunity rather than a long-term investment. I’m not sure I would invest in it at its current price, though I do think it’s probably going to go up more before it finally crashes.


  22. Markets don’t function very well in times of crisis.

    In pre-WWII hyperinflation (it affected multiple countries in Europe), people were trading their family heirlooms, e.g. a piano, for only a few months of food.

    An Englishman noted a bottle of wine in Germany from the cheapest source he could find was priced higher (in terms of pound sterling) than a bottle from the Savoy!

    This is now happening in Zimbabwe where gold panned out of a river is traded for bread at several times the price of what bread costs in a stable economy.

    Don’t forget here in the U.S. the federal government chose to call in all gold bullion (paying $20/ounce) in 1933, and prohibited its citizens from owning gold bullion (anywhere in the world) until 1971.

    If the government calls in gold and silver, you can’t easily trade it for what you need, unless you’re willing to deal on the black market, and risk getting ripped off or caught in a sting operation (you’ll be made an example)

    Better to store food, and those items you would need anyway.

  23. The best deal I’ve found on silver bullion is through — great site, totally reliable, etc., and a good way to protect some of your assets from the ever-inflating dollar.

    I don’t think it’s over board or extremist to plan ahead in this way or even prepare for possible financial collapse. Rome fell, too.

  24. “Beyond the Emergency Fund” is an interesting idea for a series of posts. I know you’re busy with other things — isn’t everyone? — but how soon can we expect to see the two remaining parts? C’mon, give us a hint. Hey, an inquiring mind wants to know…