A fixed reserve or a percentage buffer: how much extra has your child set aside?
By Erik Nilsen · Kroni3 min read
A buffer in a purchase budget is money kept available for a possible extra cost. It is not an amount already spent. Calculate the buffer under your family's chosen rule and check whether it covers the particular cost still uncertain.
Test two rules on the same base price
In a hypothetical example, your child plans an optional purchase with a base price of 80 units. An extra charge is not yet known, but the family considers that it could reach 20. Your child has 100 units. The arbitrary amounts and buffer rules are examples, rather than general advice about how much families should reserve.
A fixed buffer of 20 gives a budget of 80 + 20 = 100 units. A buffer of 20 per cent of the base price gives 80 × 0.20 = 16 and a budget of 80 + 16 = 96. The percentage rule reserves 4 units less than the possible extra charge of 20.
If the actual extra charge is 12, the purchase costs 80 + 12 = 92. Your child keeps 8 of their original 100. Record 92 as paid rather than 100. The 8 are their own unspent money, not a new prize for being careful.
See what happens at a higher base price
At a base price of 160, a fixed buffer of 20 gives a budget of 180. A 20-per-cent buffer becomes 32 and gives a budget of 192. The percentage buffer is now larger. With 190 available, the fixed budget fits but the percentage one does not.
That does not mean a fixed rule is always best. You still need to investigate whether the actual extra charge can be covered. A large percentage may be insufficient for a particular fixed cost, and a small fixed reserve may fail with a different uncertainty.
A realistic snag is your child interpreting the buffer as money an adult promises to provide if the purchase becomes more expensive. Write down who set it aside, where it actually comes from, and what happens if the final price exceeds the limit. A budget amount does not create new money.
Once the price is known, replace the estimate with the actual cost. Ask your family: “Which extra charge are we trying to cover, and how much does our rule reserve for it?”
Carry the calculation into your family agreement
Kroni can keep track of your child's virtual balance. The app does not transfer money, so any actual purchase is paid for outside it. Agree on what you will record, then check the amount with your child afterwards. Do not deduct a possible cost as though the purchase had already happened. Read about allowance in Kroni.
