A Financial Guide for Graduates

The completion of your apprenticeship or education also marks the end of apprentice salaries and student jobs. In many cases, the start of your career also brings with it your first somewhat larger salary.

There are a number of financial points that are worth reviewing as a young career newcomer. Which bank account makes sense for you, and which insurance do you actually need? Overhauling your personal finance setup is all the more important when your move to begin a career coincides with moving out of your parent’s home into your own place.

1. Create your own personal budget

Creating a budget that matches your new, employed life is very important. A budget helps you to keep your income and expenses in check. Your budget should be calculated so that your expenses never exceed your income. When creating your budget, make sure to account for all relevant expenses – including the easy-to-forget ones like taxes and public radio and television fees. You should also make sure to put aside money for unpredictable costs like dental work or car repairs.

You can find useful tips in the guide to planning a budget. The moneyland.ch budgeting tool makes creating a budget easy.

Think about your financial goals. Divide them into short-term goals (taking a trip next year, for example), mid-term goals (buying a car or even starting a family, for example), and long-term goals (saving for retirement, for example).  

2. Choose the right bank account

As a teenager and student, you likely benefited from Swiss youth accounts and student accounts with no basic, annual fees for the account or debit card, as well as high interest rates, discounts, and other benefits. Some banks let you continue using your youth account until you reach the age limit (between 20 and 30 years old, depending on the bank). Otherwise, your account will normally be converted to standard account or package for adult customers.

But there are exceptions: The Aargauische Kantonalbank lets you keep your student account for up to three years after you begin working. UBS offers special bank packages for career newcomers that are more expensive than its student accounts, but cheaper than its regular adult accounts. In the past, similar offers were available from other banks as well.

The important thing is to compare banks based on your individual needs and the specific services you want to use.

Services that are commonly offered with private accounts are:

• Receiving money (salaries, tax refunds, or refunds from your landlord, for example).
• Paying bills (your rent, health insurance, mobile plan, and electric bill, for example) via bank transfer, or using eBills and direct debits when available.
• A debit card for paying for purchases and withdrawing money at ATMs.
• Transferring money from your private account to a savings account or retirement account at the same bank.
• Tracking your financial transactions made using the account, and checking your account balance via online or mobile banking.

You can use the moneyland.ch private account comparison and bank package comparison to compare offers from both conventional banks and neobanks. The comparisons also account for youth accounts, based on your year of birth.

If being able to withdraw money at ATMs and supermarket tills is important to you, then pay attention to cash withdrawal fees. Many banks only let you withdraw money for free at their own ATMs, and charge a fee for withdrawals from ATMs belonging to other banks. This fee is often two francs per withdrawal.

3. Choose the right debit card or credit card

Debit cards and credit cards can both be used for everyday transactions. For example, modern debit cards like the Debit Mastercard and Visa Debit can also be used for online payments. Credit cards have a small advantage for certain kinds of transactions like car rentals and hotel stays. But other than that, debit cards and credit cards are largely identical when it comes to paying for purchases.

For career newcomers, it can be beneficial to understand the differences between debit cards, credit cards, and prepaid cards.

• A debit card is directly linked to a private account. Purchases are charged directly to your bank account. You normally cannot spend more money than is available in your bank account.
• A credit card is not linked to a bank account, although many banks let you deduct your monthly credit card bill directly from your account. Purchases are paid by the card issuer, which then bills you for the sum total of purchases once a month. Your credit card has a limit for total spending that is set by the card issuer. This limit is typically equal to around one monthly salary. No matter how much or how little money you have in your bank account, you can always use a credit card to spend – up to the card’s limit.
• A prepaid card is not normally linked to a bank account. You need to “load” the money you want to spend into the card’s prepaid account in advance. You can never spend more than what is in the prepaid account.

4. Insurance for career newcomers

Insurance is also an important topic when you are just starting out in a career. You can find the most important information about necessary insurance here:

• Mandatory health insurance: All residents of Switzerland are required to have basic health insurance. Swiss mandatory health insurance covers the costs of many necessary medical treatments. In addition to the mandatory insurance, many Swiss insurance providers also offer voluntary, supplemental health insurance. Many people make the mistake of keeping the accidents coverage from their mandatory health insurance after becoming employed. In many cases, that is an unnecessary expense, because if you work for an employer more than eight hours per week, you are covered by employer-based accident insurance. You can find more tips in the guide to cutting the cost of health insurance premiums.
• Personal liability insurance: This insurance is voluntary, but getting it is important. It covers costs of liability claims against you when you accidentally injure another person or damage someone else’s property. This guide offers tips for choosing the right personal liability insurance. Typically, you remain covered by your parent’s insurance up to the age of 26 even if you no longer live with your parents – but only if you are not permanently employed. As soon as you become employed, you should consider getting your own personal liability insurance.
• Household insurance: Household insurance covers your things. For example, you can claim insurance benefits if your things are damaged by fire or water. You normally remain covered by your parent’s household insurance for as long as you continue to live with them (including on a weekend basis).
• Unemployment insurance: When you get a job in Switzerland, your employer has to sign you up for Swiss mandatory social unemployment insurance. Part of the cost of this insurance is deducted from your salary.
• OASI/DI: The OASI pays you an old-age pension when you retire, and also pays out survivor’s pensions to your dependents if you die. The DI provides various benefits and a disability pension if you become disabled. Both the OASI and the DI are mandatory. The insurance premiums are deducted from your salary. If you have primarily had odd jobs or apprenticeships before beginning your career, it is beneficial to check whether your employers missed any OASI/DI contributions. You can make extra payments to close any gaps that occurred in the last five years so that your pension accurately reflects your income.
• Pension fund: When you become employed in Switzerland and earn more than 22,050 francs per year, your employer has to sign you up to an occupational pension fund. This occupational pension fund complements the basic pensions you receive from the AHV and IV.
• Accident insurance: When you work for a Swiss employer more than eight hours per week, they have to take out employer-based accident insurance for you. The employer pays part of the insurance premiums, and deducts the rest from your salary.

5. Pay attention to taxes

Taxes are often a complicated topic for people who are just starting to work. To avoid unpleasant surprises, make sure to remember to put money aside for taxes.

Because taxes for Swiss and permanent residents are only billed after the tax year, having to set aside money to cover them can be confusing for some people. It is possible to make advance payments, but the size of these payments is determined by your information for the previous tax year. If you were studying or doing an apprenticeship in that year, then you may have paid little or nothing in the way of taxes. Tip: Contact the tax office, inform them your new circumstances, and ask if they can raise the amount you can pay to match your real income.

6. Create an emergency fund

An emergency fund is an amount of money that you keep just for unforeseeable emergencies. Examples include an emergency car repair or expensive dental work.

As a general rule, your emergency fund should be big enough to cover between three and six of your monthly budgets. In many cases, it is only possible to build up an emergency reserve once you have completed your studies and gotten a job with a normal salary. As someone just starting their career, building up an emergency fund is a good first financial goal. How long it will take you to do that depends on your specific situation. The lower your living expenses are and the higher your income is, the faster you could potentially build up your emergency fund.

The fund should be accessible at all times, so it is generally best to keep it in a savings account. Pay attention to the conditions for withdrawing money. Some people prefer to keep their emergency fund at a different bank in order to minimize the temptation to plunder it for non-essential spending.

You can find useful tips in the moneyland.ch guide to emergency funds in Switzerland.

7. Save and invest

Make a point of setting money aside for future dreams and wishes.

Saving money in a savings account lets you earn a low return in the form of interest with little risk of losing money. There are no fluctuations in your account’s value, and the balances of Swiss savings accounts are protected by Swiss depositor protection, up to a limit of 100,000 francs per customer.  

It can be beneficial to use different savings accounts for different purposes. That way you can use standing orders to place specific amounts in each account. For example, you could have one savings account in which you place money for taxes, one for repairs and other costs related to your car, and one for unexpected expenses.

Investing money that you want to hold onto for mid-to-long-terms in stocks and other securities can potentially yield higher returns than you would get with savings accounts. But stocks can also lose value.

Additionally, you should only invest money that you will not need in the foreseeable future. If you are going to invest in the stock market, you should be ready to leave your money invested for many years without touching it.

Ideally, you should invest the money in an exchange-traded fund (ETF) which, in turn, invests in a broad array of different assets. By spreading your money out across many different stocks, you minimize the risk of losing money. Pay attention to the total expense ratio (TER) when choosing an ETF to invest in. You can find useful tips in the guide to choosing the right ETF.

8. Use the pillar 3a to save

While it may be a long time until you reach retirement age, contributing to the pillar 3a right from the time you are young is a good idea. Contributing to the pillar 3a not only builds up savings to fund your eventual retirement, but contributions are also tax deductible.

The disadvantage: Your money is locked up until five years before you reach the standard Swiss retirement age. However, there are certain other situations in which you can make early withdrawals from the pillar 3a.

Pillar 3a products are offered by banks, insurance companies, and independent retirement foundations. You can use pillar 3a savings accounts that yield interest, or pillar 3a retirement funds that invest in securities like stocks and bonds. Investing the money in securities can potentially deliver larger returns, but there is a risk that the securities will lose value as well. The longer you keep your money invested in securities, the higher the likelihood of earning returns is.

You should generally avoid using mixed life insurance to save for retirement. Life insurance with cash value is inflexible, and committing to paying for an insurance policy with a very long term (typically 40 years) at a young age does not make sense. Your situation may completely change over time. For example, you may have difficulty continuing to pay high insurance premiums once you have children. You will generally lose a lot of money if you terminate a cash-value life insurance policy ahead of schedule. It is better to use a savings account or investment solution to save or invest for retirement. If you need life insurance, then getting term life insurance without cash value is more efficient.  

9. Save on everyday expenses

There are big differences in the prices charged for the same products and services. Take the time to compare prices and go with the merchant that offers the best value for money.

You can find tips for saving on many different everyday expenses in these moneyland.ch comparisons and guides:

• Swiss mobile plan comparison
• Swiss video streaming comparison
• Swiss music streaming comparison
• Swiss home Internet plan comparison
• How to save on groceries in Switzerland
• How to save on Swiss public transportation
• How to save on restaurant dining in Switzerland
• Saving guide for Swiss cinemas
• How to save at Swiss hotels
• Saving tips for gym memberships in Switzerland
• Saving tips for car owners in Switzerland