Calculate buffer - how much do you need?

Research by NIBUD shows that almost half of all Dutch people cannot financially cope with a major financial setback, such as a car breaking down. This sometimes has major consequences. That is why it is useful to keep money aside that you can fall back on. The money you reserve for unforeseen circumstances is called a buffer. In this article, you can read what a good buffer is and how you can build it up.

‍What is a good buffer?

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

• Directly replace material items in and around your house
• Pay for the maintenance of your home and/or car
• (Temporarily) be without work
• Pay for unforeseen healthcare 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 from NIBUD is one of the best known.

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

Good to know: Your employment situation is not included in the NIBUD calculation. If you also need a buffer for that, you must calculate this manually.

How do you build up a buffer?

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

• Saving
• Investing

If you are saving for a buffer, it is sensible to periodically, for example every month, put aside an amount. NIBUD advises reserving at least 10% of your net income as a buffer. It is sensible to transfer this money directly to a separate savings account as soon as you have received your salary. This way, you prevent yourself from using it  for other purposes.

Another way to build up a buffer is by investing. When you invest money, you put it in with the hope that it will be worth more in the future. You can invest your money in countless ways. For example, in companies, raw materials, and bonds. Does investing sound interesting, but you do not have the desire or time to delve into it? Then Vive might be for you.