liquidity buffer

A liquidity buffer is a reserve of easily accessible funds that an individual, business, or financial institution keeps on hand to meet unexpected expenses or sudden financial needs. It acts as a safety net, ensuring there are enough resources to cover commitments even if income is delayed or expenses rise unexpectedly. For example, having savings in a readily available account serves as a liquidity buffer, providing financial stability and reducing the risk of needing to borrow at unfavorable terms during emergencies or downturns.