Civic · 6 pages · 12 min
Why spending it is the point and the fear
A reserve is saved so it can be spent in a shock, and spending it too early is the danger.
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From the opening
The point of a rainy-day fund is to spend it when the shock named in the rule arrives, so services do not have to be cut in full at the worst moment. The fear is that the same power to spend will be used early, on ordinary wants, and the stock will be gone when the shock the fund was built for finally appears. The opening covers the withdrawal is the purpose, early spending is the fear, and rebuilding the fund is the hard half.
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Inside
- The withdrawal is the purpose
- Early spending is the fear
- Rebuilding the fund is the hard half
- An unusable fund misses the point
- Where the idea stops applying
- A distinction worth keeping
Sources
- Countercyclical budget reserves
- Replenishment of stabilization funds