Everyone has to save

Many people do not have the opportunity to save. The monthly income they receive is low and they have no money left to save. However, it is necessary to always have a reserve on hand. The income at social assistance level is based on the minimum amount needed to get by. The people who receive this have no money for extras, and have to try to make ends meet every month. This will often not be easy due to ever-increasing costs and lagging increases in the minimum wage (this is what social assistance benefits are based on). Nibud also advises these families to keep some capital on hand. These so-called buffers must ensure that families can continue to survive on the amount of social assistance benefits in the future.

Making saving possible by saving

Families who are currently struggling to make ends meet each month must take measures now to have savings available. People who don’t have this will eventually get into trouble. There will come a time when a major expense will have to be incurred for which there is no money. The money must then be raised by borrowing it. Borrowing causes even bigger problems. After taking out the loan, money must be made available every month to pay the interest and repayments. The interest rates for such loans are often high (between 8% and 12% approximately).

How much money should I keep on hand?

The amount of buffer you must maintain depends on several factors. A family with four children must maintain a larger buffer than a family with only one child. The buffer will also be higher with higher fixed costs. You will find a buffer calculator on the Nibud website. By answering a number of questions about your personal situation, you will receive advice on your screen. After calculation, a minimum buffer and an advisory buffer will be indicated. Assuming an average family with two children, owning a house and without debts, the minimum buffer will be approximately 5,500,= the advisory buffer will be 12,500.

Save or borrow

The importance of saving is easy to explain by showing the consequences of taking out a loan. Suppose a family unexpectedly needs an amount of €5,000 immediately. They do not have savings and will borrow the amount by taking out a loan. They opt for a revolving credit. They take out the loan from their home bank with an interest rate of 8 percent. From the start date, they must pay 100.00 monthly in interest and repayment. It will take a few years to pay back this loan to the bank. However, there is a reasonable chance that the family will need money again during the years of repayment. In that case, the solution is to withdraw an amount from the revolving credit again. A negative spiral will arise, which will be difficult to break.