9 Financial Lessons to Learn from COVID-19

COVID-19 has significantly impacted the professional lives of many people, affecting their long-term financial plans. The pandemic has brought attention to the fact that it is only our savings that will ultimately save us during times of crisis.

They say learning from others’ experiences is the best way to avoid the same pitfalls yourself. So, you can learn many financial management lessons from the crisis and the experiences of the people who suffered.

Here are nine important financial lessons from the pandemic:

1. Save as Much as you can

Savings should be an essential part of your life. The prolonged lockdowns due to COVID-19 have further taught us the importance of savings. Developing the habit of saving early on will gradually build financial independence in life.

Want to know how much you need to save? Understand the 50:30:20 budgeting ratio:

• 50% of your income must be for your essentials and regular lifestyle expenses
• 30% you should save for your long-term goals, such as your child’s education, marriage, etc.
• Rest 20% of your income is sufficient for meeting short-term goals like home renovation, car upgrade, etc.

Going by the above ratio, you can easily proportionate your savings. Thereafter, you can allocate them into various savings schemes such as PPF, Bank FD, or a ULIP, where you can multiply your savings.

2. Maintain Low Survival Expenses

Besides savings, the COVID-19 pandemic has also taught us the importance of minimalism. An effective way to ensure financial security in these crisis-hit times is to limit your survival expenses.

Remember, your lifestyle expense is all about habits. They are built over time, and they take a similarly long period to change. Thus, you may want to build only those habits you can live with over a long period.

Here’s a list of things you would want to work on for crisis times:

• Figure out the lowest amount of money you need for running all the important things in your household
• Eliminate unsecured debt as far as possible
• Have credit cards, but ensure their limits are always open in full after the due period
• Explore the ways to reduce your mortgage interest expenses

Good times, nowadays, are often synonymous with bad debt, or at least a lot of debt. So, you may want to contact a financial planner to consolidate and resolve this before the crisis hits.

3. Create an Emergency Fund

The emergency fund is a pool of liquid investments. Liquid investments include savings account balances, super saver deposits, liquid mutual funds, etc. In other words, any investment that keeps your money safe and easily available.

You can even count your credit card in this category, as it is also easily usable for transactions.

Why Do You Need an Emergency Fund?

It’s easy to get this question if you have already created a large pool of long-term investments and real estate. So, for one, the purpose of an emergency fund is to support you at a time when nothing else is available. For example, in the case of job loss or loss of income from a profession. 

The reason you need this emergency pool of funds is that, in such situations:

• Your insurance plans will not work
• You may not get a loan
• Your family and friends might be in the same boat of crisis

How Much Emergency Fund Do You Need?

Ideally, the emergency fund should take care of the following expenses:

• Kitchen expenses
• Child’s school fee
• Loan EMIs
• Insurance Premiums
• Utility Bills

The amount of money you will need depends not only on the amount of these expenses per month but also on the duration of the expenses. 

Ideally, for any profession and any age, saving six to nine months of your income should be enough for emergencies. However, you can adjust the time according to your professional experience and industry.

Click to use: Power of Compounding Calculator

4. Buy a Family Health Insurance

During the COVID-19 pandemic, we saw many families who were affected, scrambling for medical support. Health insurance is a financial plan that is purpose-built for such emergencies. Thus, a family health plan that can take care of a large part of your medical expenses is a must.

You need the following two types of health insurance plans:

• Mediclaim cover for hospitalisation and treatment costs and daycare expenses
• Critical health cover against life-threatening diseases like cancer and heart failure

5. Budget Preventive Medical Care

The COVID-19 pandemic has also forced us to realise the importance of good health and vitality. With preventive healthcare, you can avoid many large medical expenses and most of all emergencies.

Thus, budget the regular health checkup in your expenses and maintain God’s gift without hiccups.

6. Diversify your Investments

The next financial lesson from the pandemic is to invest your money into appropriate schemes that can build your wealth.

• The most effective way to achieve this is to invest in diversified investments that include both equity and debt.
• A smart way to do this is to invest your money in a ULIP, such as the Wealth Edge plan by Canara HSBC Life Insurance. It offers you multiple options to choose from, such as ‘Invest Plus’, ‘Premium Plus’, or ‘Life Plus’.
• A part from that, it offers flexibility with the option to alter your premiums, premium payment term, policy term, and sum assured.

7. Have an Adequate Term Life Cover

During the pandemic, we witnessed many affluent families suffering financially due to the sudden demise of the primary breadwinner. Term life insurance coverage is one small investment that will help you avoid such a situation for your family.

1. Having an adequate term insurance cover, i.e., 10-15 times your annual income, is sufficient to take care of the following for the family:
   • Ongoing debt
   • Household expenses
   • Important future goals
2. You can look for the regular income + lump sum payout feature in the plan
   • The regular income feature allows your family to rest easy
   • They can use the lump sum to pay off any debts and invest in long-term goals

Term insurance premiums are the lowest among all the life insurance plans for any age. Therefore, whether you have life insurance or not, ensure the long-term financial safety of your family with a term life cover.

Click to use: Term Insurance Calculator

8. Long-Term Investment

Long-term investments are the mainstay of your financial life. The pandemic forced almost everyone to look at their finances in a new light. While we have talked of all the short-term investments and emergency needs, long-term investments are also equally important.

With the modern-day lifestyle expenses and demanding work environments, it's easy to miss long-term investments. So, you need to have a few trusted, tax-efficient, and long-term investment options:

• Public Provident Fund (PPF):
  1. Invest for 15 years, then extendable in 5-year tranches
  2. Withdrawal is allowed after 5 years
  3. Completely tax-free
  4. Maturity money cannot be repatriated
• Unit Linked Insurance Plans (ULIPs):
  1. Invest up to 100 years of age. Eg., Century Option of Invest 4G from Canara HSBC Life Insurance
  2. Partial withdrawal allowed after 5 years
  3. Withdrawals and maturity are completely tax-free if the annual investment does not exceed ₹ 2.5 lakhs
  4. Bonuses for long-term investors
  5. Invest in both debt and equity funds or hybrid funds
  6. Systematic investment and withdrawal options
  7. Life cover and premium protection option
• Guaranteed Savings Plans:
  1. Another long-term life insurance savings scheme
  2. You can estimate the maturity benefit beforehand due to guaranteed benefits
  3. Long-term investors are rewarded with additional bonuses
  4. Life cover and premium protection option

A part from these, you can also consider Sukanya Samriddhi Yojana and similar investments.

9. Learn to Save Tax

If you want to save money and reduce your expenses, saving tax becomes your natural goal. Most long-term investments allow you to claim deductions from your taxable income for up to ₹2 lakhs and more.

Health insurance premiums and medical expenses of your 60+ parents can give you a deduction of up to ₹75,000.

Wrapping Up

The COVID-19 pandemic reshaped how we view money, health, and stability. It exposed financial gaps in even the most stable households and reinforced the value of early planning, disciplined saving, and diversified investing.

Whether it’s building an emergency corpus, securing your family's future through insurance, or ensuring long-term wealth creation through smart investment strategies, each lesson learned during the crisis can serve as a stepping stone to lifelong financial wellness.

Start applying these insights today. The best time to be prepared for uncertainty is before it arrives.