What is a financial buffer?

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

The purpose of a buffer is to prevent you from having to interfere with your investment portfolio. It is recommended to save a minimum of ten per cent of your net monthly income to maintain your buffer. This way, you can absorb financial emergencies without having to touch your investments.