Graduating during a recession
For many, graduation is a coming of age moment and a milestone to look forward to. After all, you’ve worked hard, earned your stripes and are looking forward to a new stage in your life. However, entering the job market during a recession means that you’ll need to manage expectations.
During a recession, you’re likely to find it harder to seek and maintain employment, whether you’re a new entrant to the workforce or have some experience. This might result in a sense of uneasiness and disappointment.
Lessons from the last big recession in 2008
A DBS study on how the Covid-19 pandemic has impacted Singapore highlighted that unemployment is expected to rise through the year. In fact, the resident unemployment rate could rise to 4.2% by end-2020. This suggests that out of a resident labour force of about 2.33 million, around 97,800 residents could be unemployed this year.
This is far from ideal as the Covid-19 outbreak is likely to see Singapore head for its biggest recession since independence. But it’s not all doom and gloom either.
As those who graduated during the Global Financial Crisis (GFC) can attest, these can take you a long way: patience and making the most of opportunities. Manage your expectations and be open to delaying purchases of big ticket items like a car or home.
During the GFC in 2008, many fresh graduates turned to part-time work and unpaid internships. Some of these roles were even in industries that were completely unrelated to their fields of study. They might not have realised it then, but this allowed them to forge new paths: When the economy began to recover and full-time job opportunities opened up, many turned their part-time work and internships into a career. This is why it is important to keep an open mind.
What should fresh graduates take note of?
Uncertain times like these are a good opportunity for fresh grads to cultivate healthy financial planning habits and keep your career options open. Here are 5 such habits to adopt:
- Commit to a monthly budget
Build your financial safety net by sticking to the basic principles of saving more and spending less. Boring, but it does the job.
One way is to set up a fixed budget for spending on shopping, transport and dining. Another is to set aside at least 10% of your monthly take-home income.
With NAV Planner, you can easily keep track of your spending and saving habits. You can even use the tool to get a holistic view of your savings, by adding in what you have in other bank accounts and your Central Provident Fund (CPF) accounts.
Here’s what a good savings habit looks like: At least 3 to 6 months of emergency savings if you are earning a regular wage; More if you have dependants or are a freelancer.
Once you have built up a healthy base of savings, it will be easier for you to map out your ability to invest, take up home loans and plan for retirement.
- Find a side hustle that works for you
It is becoming clear that having a single income source will be a thing of the past. Having a side hustle is one way to have a “Plan B”. Examples of side hustles include part-time coaching in a sport, giving tuition or even monetising your hobby. By doing so, you increase your safety net and it can also help you to save for big ticket items.
- Pick up new skills or further your education
Fresh graduates can turn to SkillsFuture to pick up in-demand future skills in Singapore. Many courses available on the portal can be used with SkillsFuture credits, which lowers what you have to pay.
If you have the means to, consider furthering your studies during this period with the view that the economy will rebound after graduation. That said, education is a heavy expense, and you should do due your sums to see if you are able to afford it.
- Consider Traineeship programmes
With the Covid-19 outbreak creating a depressed employment environment, it is prudent to check out government support measures like SGUnited Traineeships Programme.
This programme allows fresh graduates develop their skills professionally despite the tough economic landscape. Traineeships span up to 9 months and arm you with industry experience, making it easier to gain a foothold in the job market when the economy recovers.
The estimated monthly training allowance for each qualification is pegged to 50% to 70% of median starting salaries, with the government funding 80% of the training allowance.
- Invest your idle cash
Investing might seem daunting if you have little or no knowledge of investment products. But you can always start small, with the idle cash you have after setting aside your emergency funds.
Setting up a DBS Invest-Saver plan is an accessible way to start. It is a regular savings plan that lets you accumulate low-cost Exchange Traded Funds and Unit Trusts in affordable instalments, starting from S$100 a month.
Another option is digiPortfolio, which is a hybrid of robo algorithms and human smarts. It’s built for those who want to invest simply and confidently, don't have time to watch the market, want experts to nurture your investment, want a quick and easy way to diversify regionally or globally, and want to supplement other investments as part of your long-term strategy.
With time on your side, adopt a long-term investing approach to enjoy the benefits of compounding and ride out the market volatility.
You can progressively upgrade your knowledge of the various financial instruments and set up your financial plan through the NAV portal. Besides monitoring your cashflows, the NAV Planner tool also helps to identify and close your insurance gaps and offers customised advice on how to achieve financial wellness.
Ready to start?
Speak to the Wealth Planning Manager today for a financial health check and how you can better plan your finances.
Alternatively, check out NAV Planner to analyse your real-time financial health. The best part is, it’s fuss-free – we automatically work out your money flows and provide money tips.
Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.