4 Financial Lessons We Should Learn From COVID-19 Pandemic

The coronavirus pandemic has also dealt a significant blow to the economy and industries, prompting companies to announce pay cuts, layoffs, and licenses. Here are four money lessons you can learn from this situation.

To say that 2020 has been disappointing would be an understatement. The coronavirus crisis has become more than just a health crisis. Economies, markets, and industries around the world are suffering from this pandemic. COVID-19, along with the economic recession and the crude oil crisis, has disappointed investors and savers.

The pandemic has also dealt a significant blow to the economy and industries, prompting companies to announce pay cuts, layoffs, and licenses. People are witnessing a financial crisis due to job losses and pay cuts. In these challenging times, there are some important financial lessons you can learn from COVID-19.

Essential money lessons you can learn from the COVID-19 pandemic:

Health insurance is essential.

The coronavirus is an unprecedented health crisis that has claimed the lives of more than 75,000 people around the world. Not only has it cracked health systems in several countries, but it has also punched holes in the pockets of many. Due to health care expenses, if you don't already have health insurance, there is never a better time getting one. Even if your employer provides group health insurance coverage, it is time for you to purchase a separate health insurance policy that offers adequate coverage for you and your family.

One reason to buy a health insurance policy is that your employer's insurance coverage will not be ineffective in the event of layoff/loss of a job. Please note that in light of COVID-19, the government has directed all major insurers to offer a standard, affordable, basic health insurance policy called Arogya Sanjeevani Health Insurance with coverage between 1 lakh rupees to 5 lakh rupees. It is available in multiples of Rs 50,000.

Don't invest in stocks for short-term goals.

The coronavirus has sent national markets plummeting. Investors have lost their accumulated money over the years. The market is extremely volatile, and the risk is high. Some people who have invested in stocks for short-term goals, like buying a car or bicycle, etc., have struggled due to market volatility.

Equity investments are best for building your wealth and planning long-term goals like marriage, retirement, etc. However, if your goal is only a couple of years away, it is better to switch your investments to safer paths. According to financial experts, people should invest in stocks only if their goal is more than 5-6 years away. For short-term purposes, use debt funds and bank deposits.

It's no secret that when the market is high, stocks offer stable returns, but in uncertain times like these, when markets are volatile and have yet to recover from the COVID-19 crisis, it's safer. Move your investments. Otherwise, you may not achieve your goal.

One source of income is not enough.

Have you ever wondered why millionaires, billionaires have multiple sources of income? It's because life is unpredictable and having multiple sources ensures that you will have options to rely on in times of crisis. People who are entirely dependent on a job for income often struggle financially when they lose their position amid a situation like this one.

In case you lose your primary source of income, you cannot pause your monthly utility bills and other necessary expenses. This is where an alternative source of income will come in handy. If you're still dependent on a single source of income, it's time for you to diversify. Look for ways to generate revenue through other options, part-time jobs, freelance work, online content creation, rental money, etc. Can you earn some extra cash?

Having an emergency fund is a necessity.

People often do not have a contingency fund or an emergency fund. However, this pandemic has taught us that having an established emergency fund is not negotiable. People without emergency funds who have lost their jobs or witnessed pay cuts are now going through a financial crisis as they cannot repay EMIs, bills, etc. This could have easily been avoided if they had had a contingency fund to draw on during this period—a difficult moment.

The rule of thumb for creating an emergency fund is to have at least 6-12 months of spending on your kitty. Most investment experts and financial planners emphasize that building an emergency fund is an essential cardinal rule of financial planning. If you have an emergency fund, you will have a financial cushion to draw on even if your job is lost or your salary is reduced.