Money lessons the COVID-19 pandemic taught us
The global pandemic that resulted from the COVID-19 outbreak taught us to expect the unexpected. Our lives have been disrupted, and we have been forced to adapt to a new normal far from the comfort zone we once happily basked in. But there is no denying that a silver lining did exist amidst all of the chaos.
Aside from teaching us about the importance of digitisation, COVID-19 shed light on some crucial financial matters, allowing us to put the pandemic’s financial lessons in the limelight.
The importance of having an emergency fund
This term is simple and straight to the point. An emergency fund refers to a sum of money you’ve accumulated and placed aside in case of emergencies. As a typical rule of thumb, an emergency fund must equate anywhere between 3 to 6 months’ worth of your expenses. This financial tool particularly comes in handy when sudden unexpected matters decide to knock on your door.
With the pandemic hitting the world at full force, it caused major business operations to either slow down or shut down completely. Many employees had to endure pay cuts while many others lost their jobs altogether. This is why an emergency fund is important. Because it allows you to stand on your feet if you’re having financial trouble. And while it may not keep you financially afloat forever, it can help you for a good enough amount of time until you can get back on your feet again!
Saving is key
A savings account and an emergency fund have several things in common, but the key difference is that whenever you suffer from financial instability, you look into your emergency fund first. In case you don’t have one, that’s when you start digging through your savings. But nonetheless, saving remains a vital financial step to take. It helps you build your wealth, account for future events, and is a formidable asset and weapon in the face of emergencies!
Saving money helps keep your mind at ease during uncertainties while guaranteeing financial security. And even if it’s just a small sum, the impact that it has in unfavourable circumstances is greater than you think. And if COVID-19 taught us something, it’s the importance of having money on the side.
Diversifying investment
We’ve tackled investment a couple of days prior, and if you missed it, then no worries! Here’s a quick recap. Financial investment refers to placing your money into assets and securities — such as stocks, bonds, mutual funds etc. The reason is simple. Because when you invest in financial assets and securities, you can expect to earn some extra cash over a period of time, depending on the type of security you’ve invested in. But with the COVID-19 outbreak, some securities have outperformed others.
For example, you might have invested 250 JOD at an oil company by buying stocks. When the pandemic knocked the air out of the company , it resulted in business failure, which led to the price of stocks falling. If you’ve only invested in stocks, then you most probably lost a good chunk of your money. But assuming you’ve also invested in bonds worth 500 JOD, and the bond market was flourishing during that period, then this investment most definitely cushioned your fall.
In short, it’s important to diversify investments instead of keeping all your eggs in one basket — you may never know what’s going to pop up.
We’re still living in the aftermath of the COVID-19 pandemic, but thankfully, we’ve learned a couple of tips and tricks that have helped keep us afloat. And in case you didn’t know about these financial lessons, then we hope we’ve enlightened you enough for you to take action and start planning for a healthy financial future that will make you more resilient.
