5 Critical Money Lessons Taught By The COVID-19 Crisis

The current Covid-19 crisis has brought daily life to a standstill. Businesses are struggling to remain afloat in the pandemic-stricken world. Almost every sector of the economy has been hit by supply and demand shocks. But it is only hard times that teach us the most valuable lessons. The COVID-19 crisis has taught us critical lessons about money.

1. Always have an emergency fund Unfortunately, we realize the importance of saving for a rainy day only after we are caught up in a storm. Owing to the current situation, business losses and layoffs have become a commonplace. In such times, an emergency fund would’ve relieved our financial burden.An emergency fund safeguards our financial resources for such unforeseen contingencies. The economic impact of such contingencies could be difficult to predict. Therefore, it is always safe to keep aside at least 6 months of earnings to cover any unplanned expenses or income deficiencies.
2. Avoid borrowing more than you can repay Due to the overly competitive environment, banks and other financial institutions are eager to offer loans at attractive interest rates. When strategically managed, loans can ease our financial burden. But increasing our credit just because of easy availability of loans shouldn't be a reason to borrow.The COVID-19 crisis has taught us that there is no point in living beyond our means. Paying high interest rates for borrowings that could’ve been avoided is one of the worst financial mistakes one can make. We must always evaluate priorities and always have a cut-off limit for our expenses.
3. Invest in health insurance People have finally realized that investing in health insurance is a priority and not a matter of choice. Irrespective of whether one is covered by their workplace health insurance plan, individually investing in health insurance has become a must.Workplace health insurance plans are cookie-cutter policies which have very little or no scope for customization. They may not cover all critical illnesses or have limitations with respect to the sum assured or high deductibles. It is always better to have control over your health insurance plan.The pandemic has finally made us all understand the importance of investing in our health.
4. Diversify your investments You may have heard of the famous saying “Don’t place all your eggs in one basket.” This holds true in matters of personal finance and investment planning . Diversifying our savings in varied and different asset classes ensures distribution of risk. With entire economies succumbing to the impact of COVID-19, a wise takeaway for all of us should be to diversify our investments and not concentrate our portfolio on the same or similar asset classes.
5. Ensure all your nomination formalities are complete Usually people think of nomination formalities as an unnecessary and boring task that can be put off for later. However, the importance of filling out all nomination details on time cannot be stressed enough. In these trying and testing times, a wise call should be to complete all nomination formalities and secure our family’, thereby saving them of any hassle in the future.

The coronavirus outbreak has changed our perception about money. We have learnt to value the importance of savings as we distance away from our consumer-driven lives. In these unpredictable times, no one knows what tomorrow looks like. But we can try to learn from our mistakes and move forward towards a safer future.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.