Lesson 3 of 10 · 7 min read
The buffer: how big and where
Without a buffer you're forced to sell at the worst possible moment.
Why this comes before investing
A buffer isn't a savings goal, it's insurance against yourself. Without one, every unexpected bill is a reason to sell investments, and those bills rarely arrive at a convenient moment. A washing machine breaks in the same month the market is ten percent down, because both happen when the economy turns. The buffer is what allows you to do nothing when prices fall, and doing nothing is the single most important skill you have as an investor.
How big
The classic rule is three to six months of fixed costs. Not your income, that's too much; not your spending including holidays, because you'd cut those in a hard month. It's about what runs on regardless: rent, energy, insurance, groceries. Three months is enough on a permanent contract with a partner who also earns. Six to twelve if you're self-employed, live alone, or work in a field where losing a job means a long search. When in doubt, more — because the difference between too much buffer and too little isn't symmetric.
In practice
Fixed costs of €1,400 a month means a buffer of €4,200 at three months, and €8,400 at six. Those are the two numbers to work towards, not 'as much as possible'.
Where it belongs
In a savings account, immediately accessible, at a bank covered by your country's deposit guarantee. Not in shares, because then it's gone precisely when you need it. Not locked into a fixed-term deposit, because then you can't reach it. Yes, it earns almost nothing and slowly loses purchasing power to inflation. That's the price, and it's worth paying: this money isn't there to grow, it's there so the rest can grow without you having to intervene.
When you use it
For things that are both unexpected and necessary. A broken car you need for work, a dentist, a month without income. Not a holiday or a phone, because those aren't unexpected — you save for those separately. And once you've used it, you refill it before you invest again. A buffer you emptied once and never topped back up isn't a buffer any more, it's a memory of one.
Stocky says
Keep your buffer at a different bank from your current account. The extra minute it takes to reach it is exactly enough to ask yourself whether this is really an emergency.
Remember this
- The buffer exists so you never have to sell at a bad moment.
- Three to six months of fixed costs, more if your income is uncertain.
- In an instantly accessible savings account — not invested, not locked away.
- Refill it after use before you invest again.
There is a quiz for this lesson
3 questions that check whether it stuck. They live in the app, because a quiz nobody grades teaches nothing.
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