Buffer fund: how much savings should you have for a rainy day?

What a buffer fund is

A buffer fund is savings whose purpose is not to earn a return but to be available immediately. It pays for things like a broken washing machine, a car repair, a dentist's bill or everyday expenses during a layoff or illness. Without a buffer, an unexpected expense is easily financed with consumer credit, which is expensive money.

There is no official authority recommendation in Finland for the size of a buffer. A commonly used rule of thumb is 1–3 months of essential expenses, and 3–6 months if income is uncertain. Economist Hannu Nummiaro has estimated that a buffer should equal at least two months' net income.

How much of a buffer do Finns have?

According to a survey commissioned by LähiTapiola in 2024, 65 % of Finns estimated that their savings would last at least two months if their income stopped and their expenses stayed the same. 15 % said their savings would last at most a week, compared with 9 % in 2021. The buffers of 35–44-year-olds in particular had thinned.

How to calculate your own buffer

Calculate the size of the buffer from essential expenses, not from gross pay. Go through three months of bank statements and add up the expenses you cannot flex.

Housing: rent or maintenance charge, loan repayment and interest, electricity and water.
Food and groceries.
Transport: public transport or the compulsory costs of a car.
Insurance, phone and internet, children's compulsory expenses and medicines.
Enter the amount for the monthly figure you are aiming for. For example, with essential expenses of €1,800, a three-month buffer is €5,400.

Which factors increase the need?

It is worth building a larger buffer if your income varies from month to month, for example as an entrepreneur, a freelancer or on commission pay. Likewise, owning your home, an old car and a single-income household increase the risk of unexpected expenses.

The interest rate level also matters. According to the Bank of Finland, the average interest rate on new home loans was 3.35% in August 2026, and the European Central Bank raised its key interest rates in June and September 2026. The monthly instalment on a variable-rate loan may rise, so a household with a loan should keep a buffer in case rates go up.

For a sole trader, it makes sense to split the buffer in two: a business cash reserve that pays the company's expenses and taxes, and a personal buffer that pays household expenses. When the money is in separate accounts, a quiet month does not drain both the company's and the family's funds at once. It is also worth setting aside VAT and advance tax payments as soon as a sale comes in.

Where is it worth keeping a buffer?

The buffer must be quickly withdrawable and safe from swings in value. An ordinary bank account or savings account meets these conditions. The deposit guarantee administered by the Financial Stability Authority protects deposits up to 100,000 euros per depositor and bank. Banks in the same group, for example the cooperative banks, count as one bank. Funds held in payment institutions are not covered by the deposit guarantee.

A 30 % withholding tax on interest income is deducted from interest paid on a deposit, so the net return is lower than the stated interest rate. Money Radar does not give investment recommendations, but the general principle is to keep a buffer and long-term savings separate.

If you do not yet have a buffer

Start small. An automatic transfer on payday to a separate account is the easiest way, because the money has no chance to be spent on anything else. Once the buffer has been used, it is topped up before other savings goals.

If you have expensive consumer credit, it is worth comparing its interest rate with the deposit rate. The interest on debt is often many times the deposit rate, so a small buffer and rapid repayment of the debt together can be a more sensible solution than building up a large pot of savings before paying off the debt. Assess the situation based on your own figures.

If your money does not stretch even to essential expenses or bills are already overdue, free help is available from the financial and debt counselling of the state legal aid offices. Get in touch before the bills go to collection. Money Radar's cash test calculates how many months of expenses your current savings cover.

Frequently asked questions

How much should there be in a buffer fund?

There is no official recommendation. A common rule of thumb is 1–3 months of essential expenses, and 3–6 months if your income varies.

Is the buffer in a bank account safe?

Deposit protection covers deposits up to €100 000 per depositor per bank. Banks in the same banking group count as one bank.

Is interest on a savings account taxed?

Yes. A 30% withholding tax on interest income is charged on the interest on a deposit, and the bank withholds it automatically.

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Sources

The article is general information and does not replace the guidance of an authority, a lawyer or an adviser. Check up-to-date information from the sources.