Ekonomické rozhľady/Economic Review 4/2024

VARIABLES AFFECTING EMERGENCY BUFFER
IN PERSONAL FINANCE

MILOSLAV PARACKA

 

https://doi.org/10.53465/ER.2644-7185.2024.4.214-228

 

Abstract: Managing personal finances is a valuable skill. Rules of thumb simplify financial management and help families translate theoretical knowledge into practical application. In this study, we focus on the emergency buffer, a crucial component of sound personal finances. Our data confirms that maintaining an emergency buffer remains relevant today. However, it is common for households to have insufficient buffers for unexpected events. This paper aims to identify variables that positively affect the size of households' emergency buffers. We hypothesize that monthly gross income is the primary factor influencing the establishment of an emergency buffer. We compare the levels of emergency buffers across European countries against variables such as monthly gross income, personal financial assets (PFA), and net wealth. We examine how these buffers change in relation to these variables. Our results indicate that in the countries where households typically meet the recommended emergency buffer, there is a common trend of higher monthly income, PFA, and net wealth. We find that PFA has the strongest correlation with the ability to maintain a sufficient emergency buffer.

Keywords: personal finance, HFCS, emergency buffer, monthly gross income, personal financial assets, net wealth

JEL Classification: D14, D31, G51

Fulltext: PDF

Online publication date: 23 December 2024

 

To cite this article (APA style):

Paracka, M. (2024). Variables Affecting Emergency Buffer in Personal Finance. Economic Review, 53(4), 214 - 228. https://doi.org/10.53465/ER.2644-7185.2024.4.214-228

 

Publisher: University of Economics in Bratislava

ISSN 2644-7185 (online)

 

License:

by nc nd

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.