You will be able to size a cash buffer that covers a realistic job search for someone in your position.
After the restructuring announcement, Jasmine checked her savings. She had an emergency fund of about three months of spending, built after reading that this was the standard advice. Then she asked a friend in a similar role how long her last job search had taken. "Seven months," the friend said, "and that was when the market was decent." Three months of savings and a seven-month search do not fit together.
An ordinary emergency fund is built for a burst pipe, a hospital bill or a short gap between jobs. Lesson 3.1 of The Singapore personal finance system, How big your emergency fund should be, sizes it from essential spending and a range of months. This lesson sizes the same pot for the event most likely to drain it: losing your income in a downturn.
The base is your monthly fixed costs: the spending you would still face in the first months after your income stopped, even after cutting everything optional. In practice that means housing, loan instalments, insurance premiums, money for people who depend on you, utilities and phone, and basic food and transport.
Be careful with housing loans paid through CPF. Many HDB owners pay the instalment from their CPF Ordinary Account. When you stop working, CPF contributions stop too, and the balance in the account can run down. Check how many months of instalments your current balance would cover. If it is not many, count the instalment as a cash cost.
Jasmine's fixed costs, using made-up figures: her share of the flat's loan instalment S$1,400, insurance premiums S$300, S$500 to her parents, utilities and phone S$200, and basic food and transport S$900. That comes to S$3,300 a month.
The second number is how long it would take you to find a comparable job. This depends on your role, your seniority and how many employers need what you do. Senior and specialised roles often take longer, because there are fewer openings. Roles in demand across many industries usually take less.
Ask people who have changed jobs recently in your field how long it took. Ask a recruiter who covers your area. Look at how many suitable roles are advertised now. From those, write down a realistic estimate in months.
Then add a margin. Job losses tend to happen in downturns, when many people are looking at once and employers are slower to hire, as lesson 5.1, How the job market turns before the headlines do, showed. A search that takes four months in good times can take six or more in a bad one.
Jasmine's friend's seven months was in a decent market. She estimated five months for her own search in normal conditions, then added two for a downturn: seven months in total.
The first target is fixed costs times search length. For Jasmine, that is S$3,300 x 7, which is S$23,100.
Now look at what would cover part of the gap, and be honest about how reliable each source is.
A partner's income can make a large difference. Take Kumar and Shalini from module 4, with made-up figures. Their household fixed costs are S$6,000 a month, and Shalini's take-home pay is S$4,000. If Kumar lost his job, the monthly gap would be S$2,000, so a six-month search needs S$12,000, not S$36,000. But this only works if Shalini's job is not exposed to the same downturn.
Retrenchment benefit, as lesson 5.2, Retrenchment in Singapore: what the rules and guidelines say, explained, depends on your contract and length of service, and you might not be retrenched at all. You might resign, or your contract might not be renewed. Do not count it unless your contract guarantees it.
Government support for jobseekers can help, for example the SkillsFuture Jobseeker Support scheme. The schemes available and who qualifies change over time, so check what applies to you on the Workforce Singapore and MOM websites, and count it only if you are confident you would qualify.
Jasmine is single, her contract says nothing about retrenchment benefit, and she was unsure what support she would qualify for, so her target stayed at S$23,100.
Where the buffer sits matters as much as its size. Job losses and market falls often arrive together, because both are driven by the same downturn, as lesson 4.3, What actually changes for households in a recession, explained. A buffer held in shares or a fund could be worth 20% or 30% less in exactly the month you need it.
So keep the job-loss buffer in cash or near-cash you can reach within days: a savings account, or deposits and T-bills that mature on a staggered schedule. Lesson 3.2 of The Singapore personal finance system, Where to keep it: safe, liquid and separate, sets out the options. Keep it in a separate account from your spending money, so it is not quietly used up.
The method is simple enough to do on the back of an envelope. All you need is two numbers, your fixed costs and your search estimate, and both come from your own life rather than a rule of thumb.
Write down your monthly fixed costs and your estimated job-search length, and multiply them to get a first buffer target.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).