The bank account buffer: What is it and why should you use it?

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By: Barbara Delinsky
on 8th Mar,2018

The idea of keeping emergency money in bank account is good and can provide peace of mind. Creating a bank account buffer can make it happen. Check out the article and learn what is a bank account buffer and why should you need it?
The bank account buffer: What is it and why should you use it?

Keeping extra money in an account is a wise move. It can help you can combat any surprise payment and emergencies.

A bank account buffer plays the perfect role to manage a small financial crisis like overdraft, bounced payment, and a declined transaction.

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.

In this account, you have to save 1 to 2 weeks of your income to protect you against overdrafts, bounced payments, and declined transactions.

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.

Boosting income is certainly the wise option because you know your expenses will increase over time.

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.

Search online to find out a suitable part-time job for you.

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
To keep
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?

Keeping some extra money ($500-$1,000) in a checking account (a Bank Account Buffer) helps you to protect against many small unexpected expenses.

Thus, you will be able to stay focused on your big financial goals. It will help you to stay financially stress-free as well.

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