Calculate your buffer - how much do you need?

Research by the NIBUD has shown that almost half of all Dutch people cannot cope with a major financial setback, such as a broken car. Sometimes this has major consequences. That is why it is useful to keep some money in reserve that you can fall back on. The money that you reserve for unforeseen circumstances is called a buffer. In this article you will read what a good buffer is and how you can build one.

What is a good buffer?

The definition of a good buffer depends on your situation. For example, a family with children needs a larger buffer than someone who lives alone. In general, a good buffer means that you:

• Can immediately replace material things in and around your home
• Be able to pay for the maintenance of your home and/or car
• Can be (temporarily) out of work
• Can pay for unforeseen health costs

Without having to worry about your financial situation.

Calculate your buffer

There are various tools to calculate what kind of buffer you need for your living situation. The Buffer Calculator of NIBUD is one of the best known.

On average, a Dutch person needs €18,250 as a buffer, according to the NIBUD. That may seem a lot, but this calculation also includes the replacement value of a car, for example.

Good to know: The NIBUD calculation does not include your work situation. If you need a buffer for that as well, you have to calculate it manually.

How do you build up a buffer?

There are generally two different ways to build up a buffer:

• Savings
• Investing

If you save for a buffer, it is wise to put aside an amount periodically, for instance every month. NIBUD advises to reserve at least 10% of your net income as a buffer. It is wise to transfer this money to a separate savings account as soon as you receive your salary. This prevents you from using it for other purposes.

Another way to build up a buffer is by investing. When you invest money, you invest it in the hope that it will be worth more in the future. You can invest your money in countless ways. For example in companies, commodities and bonds. Investing seems interesting to you, but you don't have the time or the desire to study it in depth? Then Vive might be for you.