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 broken car. This sometimes has major consequences. Therefore, 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 build one up.

‍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:

- Directly replace material possessions in and around your home

- Pay for the maintenance of your home and/or car

- Be (temporarily) without work

- Pay for unforeseen healthcare costs

Without worrying about your financial situation.

Calculate your buffer

There are various tools to calculate what kind of buffer you need for your living situation. The NIBUD buffer calculator 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 the replacement value of a car, for example.

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

How do you build a buffer?

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

- Saving

- Investing

If you are saving for a buffer, it is wise to set aside an amount periodically, for example, every month. NIBUD advises reserving at least 10% of your net income as a buffer. It is wise to immediately 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 a buffer is by investing. When you invest money, you invest it in the hope that it will become worth more in the future. You can invest your money in countless ways. For example, in companies, commodities, and bonds. Does investing seem interesting to you, but you don't feel like or have the time to delve into it? Then Vive is for you.

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