No one knows the future, but the recent talk about high inflation, interest rates, and a potential recession make this a great time to learn how you can best prepare yourself for the worst case scenario.
As a college student who is probably already struggling with sticking to a budget and potentially entering the job market, it can feel like an especially scary time! We’re here to help break down what a recession is and how to best prepare for it.
A recession is a time of economic hardship spread across months or years and can happen on a regional or global scale. During a recession, the goods and services that a region produces drops in value and at the same time other changes like the price of other commodities (like oil) may become less valuable. As a result, consumers may see increased inflation and higher unemployment levels as companies go through layoffs trying to cut costs. Consumer confidence drops during this time which puts less money back into the economy.
The last major recession for the U.S. was in 2008 when the housing market collapsed. During the pandemic in 2020 the U.S. also faced a short recession when industries like hospitality, tourism, and retail were impacted by shutdowns.
While it may seem daunting, there are actually a lot of ways you can prepare for a recession even while you’re in school. Here are a few to consider:
1. Build an Emergency Fund
Ideally your emergency fund can cover three to six months of living expenses. This fund should be kept in a high-yield savings account that's easily accessible but separate from your daily spending account.
Saving money is always hard to do while you’re in college, but it's essential to start financial planning and building an emergency fund as early as you’re able. If you have a part-time job or work over the summer, try to direct deposit a small account from each paycheck into a high-yield savings account so you’re less tempted to spend it elsewhere.
You never know when you’ll need to look for work and keeping your resume as up-to-date as possible will save you the panic later. Even if you’re not working, you may be gaining experience with new programs, earned scholarships you can highlight, interned over the summer, or even changed your major recently.
To be prepared for a recession, it's a good idea to assess your expenses and identify areas where you can save money. If you don’t have a budget, now is a great time to start one. There are plenty of apps, like Kora, that track your spending for you so that it will be easier to find ways to save on rent, transportation, food, and other essential expenses if you need to in the future.
You might consider meal prepping instead of impulse shopping at the grocery store, pause your gym membership and take advantage of free classes through your school or online, or reassess your current subscriptions.
Building a strong network of contacts can be a valuable resource during a recession. Make connections with alumni from your school, attend career fairs and networking events, or message people on LinkedIn who have positions or work at companies that you have an interest in. Setting up informational interviews and building these connections may help you learn about internship and job opportunities in the future.
Check out our article on side-hustles for a full list of ideas, but keep in mind that plenty of people out there will pay for freelance help with photo editing, copywriting, or even dog walking. If you’re struggling with finding a part-time or post-graduation job or internship, you can freelance or take side jobs to help build your portfolio, network, and keep a flexible schedule.
Recessions can be scary for everyone, especially if you’re preparing to enter the job market out of college, but we hope these tips will help you feel better prepared. Remember, it's never too early to start financially planning for the future, and taking action now can help you stay on track, even when times are tough.
You've calculated your expenses and income, created a plan, and tracked your spending. Congratulations on your shiny new budget!
However, we understand that life is occasionally outside your control, and the life of a college student can be particularly hectic.
So if your budget didn't stretch far enough and your bank account’s a little low, KoraCash can help. With an easy application, up to $3,000 available, and a repayment that may help you build credit, KoraCash is ideal for college students.
At Kora, we help students meet their financial needs and make building a better financial future simple. Download our app and get started!