We have learnt a lot from the coronavirus about life, and its impact will be a lasting one on how we work and live. The unfathomable losses all over the world are tragic, and most of us are learning to overcome the shadow of the pandemic.
Millions across the world contracted the disease, and millions more lost their jobs. Not to mention, the disease also impacted the way we handle our money. In this article we will explore some of the money lessons COVID 19 taught us.
Emergency savings are necessary
It is impossible to predict the next financial emergency, but one thing is essential: we learn from our past experiences. An emergency fund will not only serve as a financial Band-Aid but will also help in survival during times of crisis.
Inflation is now at its peak, and when the market will stabilize is unpredictable. The reality is that situations like this might reoccur. But without an emergency fund in our hand, we will have to break our investments or borrow.
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An emergency fund is a safety net of money you set aside for challenging situations. The best option is to choose a savings account to set aside money as emergency funds. Choosing a savings account is easy; you can open a zero balance savings account online from anywhere. Such an account is ideal as you don’t have to pay any joining or maintenance fees, and you don’t have to keep a minimum balance in the account at all times. Try to save at least 3 to 6 months’ worth of living expenses.
Less expenses means more savings
The nationwide lockdown and stay at home drive resulted in forced savings. But this is not a bad thing. Over all, it gave us a taste of how doing things on our own is not only exciting but also helps us save some extra money.
When gyms were closed, we exercised at home. Why not go for a morning walk and ditch the gym membership? A home cooked meal is more engaging, healthy and cost-effective than dinner takeaways. The money you save may not seem like much in the beginning, but add it up and look at the amount at the end of the year. You will be amazed. Cut down on your unwanted expenses, and your future self will thank you.
Get a health insurance plan
Many of us avoid investing in a medical policy, since the company where we work offers an insurance plan. The pandemic has been a wakeup call. Many of us lost our jobs, and in such a situation, we lost the health insurance provided by the companies.
Medical emergencies are unpredictable, and if any family member requires hospitalization, the money has to go from our savings. It is necessary to have a personal medical plan to keep us secure in trying situations.
Learn to budget
Budgeting should be a habit, and we should learn to stick to it. Uncontrolled expenses will not prepare you for future emergencies. Create a monthly budget and learn to differentiate between needs and wants. When you meet your needs and not your wants, you will end up with more money to help you through difficult times. Pay cuts and job losses have forced many of us to survive on a tight budget, but if we have survived, then we should learn how to live on a budget now.
Yes, the pandemic taught us a lot of lessons, and some in the hardest way possible. What matters most is how much we learn from them and apply them in our lives. How to manage your money is an important thing you learned from the pandemic, and we hope you take a wiser way ahead with your money.
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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.