A financial safety cushion is a reserve of money for unforeseen situations: loss of a job, illness, repairs or a forced move. It becomes especially important in unstable times.
How much to set aside
It is usually advised to have a reserve for 3–6 months of essential expenses. Work out how much you need per month for housing, food, phone and transport, and multiply by this period. If it is hard to save that much at once, start with a reserve for one month.
How to build it
- Determine the target amount.
- Set aside a fixed percentage of your income every month.
- Automate: set up automatic top-ups of a savings account.
- Add unexpected receipts: bonuses, tax refunds.
Where to keep it
The cushion must be accessible and safe, not profitable at any cost. Options:
- a savings account at a bank;
- part in cash at home for the essentials;
- part in foreign currency to spread risk.
Do not put the cushion into risky instruments: it must be there when needed.
How not to waste it
Keep the cushion in a separate account. Use it only for truly exceptional situations, and top it up again after spending.
