Why a small buffer matters disproportionately
Most unplanned expenses are modest: a repair, a bill, a short income gap. A buffer that covers one of those removes the need for the most expensive forms of credit, which is where the largest cost differences sit.
How to build one
Automate a transfer on payday into a separate account that is not linked to day-to-day spending. Keep it accessible but slightly inconvenient. Increase the amount whenever income rises rather than absorbing the increase into spending.
Where to keep it
A separate high-interest savings account at a regulated institution is the common choice: accessible within a day or two and covered by deposit insurance up to the applicable limits in your country. Do not place a buffer in something that can fall in value when you need it.
After the buffer
Once a basic buffer exists, the next priority is usually clearing the highest-cost debt, since the interest avoided almost always exceeds the interest earned on savings.