They both describe a pool of cash you keep for disruption: income breaks, a large unexpected bill arrives, or life throws a timing problem at you.
The only real difference is language:
- Emergency fund is the common label.
- Emergency buffer is the same idea, framed as a buffer against forced decisions.
- Cash runway is the same idea again, framed as time.
If you have one account that reliably stops you being forced to sell investments or take on expensive debt, you’ve done it.
What the buffer is actually for#
An emergency buffer is not designed to maximise return. It’s designed to remove pressure.
Pressure creates bad decisions:
- selling a long-term investment because you need cash now
- taking on high-interest debt because you have no slack
- making short-term choices that permanently damage your long-term plan
A buffer is what keeps your plan intact when timing gets messy.
Trade-off (worth being explicit): the buffer will underperform your long-term investments. That is fine. Its job is not performance. Its job is optional choices.
What counts as an emergency?#
A clean rule is: an emergency is anything that would otherwise force you to do something dumb.
Common examples:
- job loss / income interruption
- unexpected medical/dental costs
- urgent car/house repairs
- short-term family obligations
Non-emergencies (usually):
- predictable annual bills you forgot to plan for
- lifestyle upgrades
- investing “opportunities”
If you keep dipping into your buffer for predictable spending, it’s not a buffer problem. It’s a cashflow system problem.
Where people usually keep it (Australia)#
The storage choice is boring on purpose. You want:
- fast access
- low volatility
- minimal friction to use when needed
Typical options:
- high-interest savings account
- mortgage offset (if you have one)
- a separate bank account labelled clearly (adds psychological friction)
Avoid turning the buffer into:
- a trading account
- a volatile ETF “because it probably won’t be down when I need it”
That logic is exactly what breaks in a downturn.
Quick FAQ#
Is an emergency buffer the same as an emergency fund?#
In practice, yes. Different label, same purpose.
How big should it be?#
Start with 3 months of essential expenses as a baseline, then adjust based on income stability and obligations. (More detail in the main emergency buffer guide.)
Should I invest it?#
Only if you’re comfortable with the buffer failing at the moment you need it most. Most people aren’t.