How to save money in Switzerland: Beating the cost of living crisis

Switzerland is an expensive country, and it has not escaped the cost-of-living crisis unscathed. While the current economic situation for the average Swiss worker is still relatively stable, many people find themselves having to ‘tighten the belt’. Projections for the lower-to middle class are bleak, and newcomers to Switzerland are especially at risk.

Food, health, and living space – every reoccurring expense is rising fast, for a variety of factors. Here’s what you can do to get a handle on the cost-of-living crisis, in both the short and long-term:

1. Start a budgeting plan

There is no way around it: If you haven’t already, you need to start a budget and stick to it. A general budgeting-rule (which many Swiss students also learn in school) is the rule of thirds:

• 1/3 of your monthly income (at most!) for housing/rent
• 1/3 for all your ongoing, essential costs: your grocery bill, insurances, taxes, phone & internet, transportation, education, etc.
• 1/3 for everything else: your leisure activities, vacations, savings, investments, pillar 3a pension, etc.

Budgeting helps you identify ways to reduce ongoing costs. Here are some of the ‘low-hanging fruit’, i.e. easy areas to save money without restraining yourself too much:

• Phone & internet bill – Service providers often offer large discounts of up to 50%. Switching providers will allow you to find the best possible deals.
• Grocery bill – food prices have increased in the major Swiss grocery chains. Consider shopping in stores that operate under a foreign brand – most likely, you’ll find the same produce at a much cheaper price.
• Transportation costs – For public transport, the SBB half-fare travel card is a must. If you commute by car, check on your fuel efficiency and insurance coverage.

The elephant in the room is, of course, how much money you get to spend on things you actually enjoy doing. Restaurant visits, vacations, shopping sprees, and other fun activities are becoming a luxury for many people. Only time will tell how the Swiss economy develops when less people can afford to spend money on leisure. For now, closely monitor your finances and adjust your spending as necessary.

Now that you have an overview on your income and spending, let’s look at options to save money in the long term:

2. Adjust your health insurance

Health insurance premiums are on everyone’s mind again. Since 2022, the average premium for basic health insurance has risen by around 8% each year, and another hike of 6-7% is expected for 2025.

There are several reasons for this massive cost increase – inflation, better & broader healthcare, the increasing average life span, lifestyle-related conditions, and the available resources all play their part in the complex machine that is the Swiss healthcare system.

The problem is that the expensive premiums still don’t cover everything you’d expect, leaving you with high costs once you have actual health expenses. Supplementary insurance packages can close this gap for you, without breaking the bank. They offer coverage for a variety of things: gym memberships, alternative medicine, glasses, treatments abroad, transportation, and more.

Here are two ways to lower your health insurance premiums:

• Change your basic health insurance model: If you feel like the free choice of doctor isn’t necessary for you, consider changing to the GP or telmed model for lower premiums.
• Initiate insurance splitting: Splitting is the act of picking the provider with the cheapest possible option for basic health insurance, and then choosing your ideal supplementary insurance with a different provider.

Not sure how to proceed? You can contact us for a personal consultation, where we’ll find the optimal insurance solution for your specific needs, as well as handle all of your paperwork.

3. Optimize your taxes

Your tax burden varies greatly based on your canton and city of residence. Still, the average tax rates are most likely going to rise in the coming years.

Most tax-deductions in Switzerland are related to major life-milestones, which is why you should develop a long-term plan. Some of the greatest deductions are for:

• Childcare costs (if both parents are working)
• Work-related training & education
• Certain expenses related to real estate
• Pillar 3a retirement contributions

If you’re looking for tax support with expat- and entrepreneur-specific knowledge, contact our inhouse partner Zürcher Treuhand GmbH today. We’re happy to optimize the deductions in your long-term tax strategy.

4. Your place of residence

The housing crisis in Switzerland is getting worse,and many people are unhappy with the extreme rent hikes in recent years – after all, a surprise rent-increase of 5% doesn’t mean that your apartment is suddenly 5% better.

Rent is the #1 expense for most people in Switzerland. Here’s what you can do to optimize & mitigate this drain on your budget:

• Fight unlawful rent hikes: If you feel like a recent rent increase was unjustified, you may want to consider your legal options. This is where legal insurance can come in handy (which often includes expert advice to tell you how to proceed in legal matters).
• Move: If your rent is getting too high for you to bear in the long-term, you need to consider moving somewhere else. You should carefully choose where to settle down anyway, as it will affect everything from your rent to your taxes and health insurance rates.
• Mortgages: Depending on your situation, aiming for a mortgage might be the realistic solution. If you’re considering a mortgage for a home, contact us – we’ll connect you with our mortgage partners for the most optimal rates.

5. Plan your retirement

The Swiss retirement structure is seeing a shift – it was originally created under circumstances that are wildly different from today. By 2029, an additional 200’000 workers will have retired, which puts immense pressure on the future of the pension system.

If you’re starting your career today, your outlook isn’t great: because of the generational gap, you will probably have to work longer and still receive a lower pension. The higher cost for rent, food and healthcare adds to that tension. This is why a tax-saving pillar 3a pension plan is essential. Here’s how the pillar 3a works:

• Your plan is set up with a bank or insurance company
• You decide how much money you pay into your pension, with a yearly limit of CHF 7’056 (tax-deductible!)
• Your payments are invested for you into attractive stock portfolios with great returns
• You can access your pillar 3a pension when you buy a home, start a business, or shortly before retirement

Unlike pillars 1 and 2, the pillar 3a is voluntary. It’s used to secure your standard of living in retirement, and can be connected with insurance solutions for death & disability. It’s an essential tool to reduce the risk of poverty in old age, which effects expats in Switzerland especially. Contact us today to get started on your pillar 3a plan in our personal consultation.

If you’re new in Switzerland, we hope that our tips can help you tame the rising living costs and wish you the best of luck for the life in your new home!