Personal finance lessons COVID-19 teaches us

Tuesday’s announcement by Indian Prime Minister Narendra Modi, have completely locked down the nation. Due to Coronavirus epidemic, people are asked to stay at home.

This epidemic has infected a lot of people and also, caused a lot of them to lose their lives. It has created a panic among the population and affected them not just in terms of health but also financially. Amidst all of these, the epidemic has also taught us some underlying facts in the form of personal finance lessons that we must know and follow. What are they? Let’s find out.

The value of emergency fund

Many a times, people ignore the advice given by financial planners for building and reviewing an emergency fund. In fact, people are more focussed towards investment and earning handsome returns. But they forget these pre-requisites. Now, since there is a complete lockdown and some might be on 50 per cent pay or even in a situation of lay-off, in times like these, the emergency fund often comes to rescue, which is especially created for such situations. So, for those who don’t have it as of now might realise the value of having an emergency fund in place.

Short-term investments are unreliable

As we can see in the short-run, due to Coronavirus pandemic, there is a panic even among the investors that have led the markets act like a falling knife. Therefore, currently, you might see around 25 to 30 per cent fall in your equity portfolio. Thus, if you are not having an emergency fund in place and decide to use your investments, this might further prevent you from attaining your investment objective. Hence, it is important to have an emergency fund in place so that you don’t need to touch your investments.

Health Insurance

As we all know, the penetration of health insurance is very low in India. Many people just rely on the employer provided insurance or without analysing, just have a minimum health insurance with no family cover. However, in such a pandemic-like situation, health insurance helps you to cover any medical cost without disturbing your investments.

Hence, all the above lessons will not just help you to stay free financially but also, help you to be calm in such a situation. Therefore, try to have your basics clear before diving into investments. These basics are to protect your investments and help them grow. Thus, build and review them periodically.