What is a financial buffer?

A financial buffer is an amount that you set aside to be able to pay unexpected, larger and necessary expenses directly when they occur. Think of situations such as car trouble, medical procedures, household appliances that break down, or sudden loss of income.

The purpose of a buffer is to avoid having to intervene in your investment portfolio. It is recommended to save at least ten percent of your net monthly income to maintain your buffer. This way, you can cope with financial emergencies without having to tap into your investments.