Job hopping into financial security

Arlene Leggat

Considered flighty and a risk to the company, job hoppers used to be perceived as less reliable than those who set down roots and built a reputation.

However, millennials see job hopping as leaping towards new opportunities, and research is showing that they aren’t ‘flaky escapees’, but stronger recruits because of this trend. Still, job hoppers should keep their financial future and security top of mind.

It’s important to consider factors such as the Unemployment Insurance Fund (UIF), savings and pension as you move.

UIF is an emergency savings account designed to support individuals between jobs and battling to find work. If job hoppers tap into these funds while they look for the next big thing, they run the risk of not having a safety net in times of real hardship.

UIF works on a credit basis. The more you contribute, the more credit you build. If you’re unemployed you can claim those credits, but ideally you should save them for a real emergency.

Risks

Many organisations still work on a ‘last in, first out’ policy when times are tough and retrenchments are in the pipeline. Their short time at the company will mean a small severance pay and financial risk for job hoppers.

If you take out a third of your pension every time you leave a job, that’s money you’re lopping off your retirement package. Keep that money growing there until you hit retirement age, rather than spending it when you change jobs.

To ensure your pension remains stable, never take funds out when moving companies unless you absolutely must. Then open a preservation fund that can move with you – transfer your pension from one company policy to the next, but use the interest gained in the preservation fund to bolster it.

Have at least six months’ of salary put aside before job hopping. If you’re retrenched with one week’s salary, you’ll then have something substantial to support you. Put a percentage of your salary into a savings fund each month to have a nest egg.

Arlene Leggat is South African Payroll Association’s director.