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Currency Buffer Calculator
Plan in the currency you spend, not the one you earn. Enter monthly local spending and the period to cover, then test an adverse rate move.
A drop of X% means your home currency buys X% fewer local units. The required balance rises by 1/(1-X), not by X, which is why large moves are disproportionately expensive.
Buffers are measured in the spending currency
If your income is in one currency and your bills are in another, the risk sits between them. A buffer in the spending currency is the amount that keeps the same bills paid after an adverse move. Ten percent of a year's spending is a different number from ten percent of a monthly transfer, so decide which one you are sizing.
Keep the buffer in the currency you will spend. A buffer held at home is exposed to the same move it is meant to cover.
Why 1/(1-X) instead of X
If the rate falls by ten percent, each unit of home currency buys ninety percent of what it bought before. To cover the same local spending, you need the original amount divided by 0.9, which is about 11.1 percent more. For a twenty percent move, the requirement rises by a quarter. The asymmetry is the reason buffers should be tested against a larger move than the one you expect.
Frequently asked questions
Should the buffer be in cash?
It should be liquid and in the spending currency. A term deposit that matures after the bill is not a buffer.
Does the calculator assume zero income?
It sizes a balance to cover the period. If income arrives in the local currency during the period, reduce the monthly spending figure or shorten the months accordingly.
What move should I test?
Test a move larger than the recent range you have seen, not the average move. The buffer exists for the tail, not for the middle.
Is a larger buffer always better?
It costs opportunity and may sit idle. Size it to the commitments you cannot cancel, then treat the rest as investment rather than buffer.