Keeping extra money in an account is a wise move. It can help you can combat any surprise payment and emergencies.
Now, let me explain what is an account buffer and how can you create it?
A bank account buffer
If you are having a problem with your finances and struggling to set aside some extra money, you should build a bank account buffer.
It can be called a cash cushion, mini emergency fund, rainy day savings, back up savings etc.
For example, if you have a plan for paying off your credit card debt and you want to save money, you can set an account buffer to progress on your work fast.
After you’ve got a decent amount in your account, you're all set to fight back any unforeseen expenses as well.
Ways to set up a bank account buffer
To save up a decent amount in your account buffer, you have to follow some guidelines. Here you go:
1 Save extra cash into the account buffer
Try to put the extra savings into the account. For example, if you receive cash gift as birthday or holiday gift, then put the cash into the account instead of spending the money on unnecessary expenses. Likewise, you can save the tax return into the account to get it started.
2 Set aside some money from your monthly budget
To grow the account buffer, you need to set aside some money from your monthly income. To do so, you have to create your monthly budget carefully.
You have to minimize your extra expenses so that you can save some money for the account.
Reduce the cost of spending on media, cell phone cost, and other unnecessary costs.
By doing so, you will be able to save a good amount into the account buffer.
3 Boost your overall income to feed the account buffer
To save enough money into the account buffer, either you need to cut down extra expenses or earn more.
So, try to find out ways to earn more to boost your income.
You can start doing a part-time job like freelancing, teaching, blogging, giving training, crafting, etc.
There are several online jobs available that you can consider as a potential side gig.
You can also ask your employer to increase your monthly salary. To do so, you have to perform well at your workplace.
A bank account buffer and an emergency fund is not the same
You have to understand that an emergency fund has a different purpose. If you think you have a bank account buffer and you don't need an emergency fund, then you are wrong.
Bank account buffer vs an emergency fund
How is a bank account buffer different from an emergency fund?
Here you go:
|Aspects||Bank Account Buffer||Emergency Fund|
|Purpose||A bank account buffer helps you to overcome minor cash flow fluctuations like paying rent or other necessary payments a few days before your paycheck deposits.||An emergency fund provides significant financial support when you are suffering from a vital financial crisis like job loss and sudden accident.|
|How much money
|You can keep 2-3 weeks of income in a bank account buffer.||You have to keep at least 6-9 months of income in an emergency fund.|
|Type of account||The bank account buffer should be kept in a checking account.||The money for the emergency purpose should be kept in a separate interest-bearing savings account.|
Lastly, a bank account buffer helps you to get financial success.
How does it help?
Thus, you will be able to stay focused on your big financial goals. It will help you to stay financially stress-free as well.