Topic 4: 3 things to do with the money saved during the lockdown
With shopping malls, restaurants, cinemas and airlines shut for business due to the coronavirus outbreak, people are discovering an unlikely benefit of the lockdown. They are actually saving money.
take a minute to think about what you can do with the money. Here are three options:
1. Build an emergency corpus: This is the first and foremost thing you should be doing with the saved money, particularly in an uncertain economic situation such as the present one.
Liquidity is a cause of concern in these trying times. people asking the question – how to get maximum return on an emergency fund. Keep it in a savings account and open a sweep account for the same or you can keep it in fixed deposits
Some banks allow parking money in FDs and automatically ‘sweep it in’ to savings accounts when there are debits from the latter. This allows you to earn a higher return than savings account interest.
Never expect any great returns on your emergency fund. You should be able to access the funds immediately. Learning from the ongoing crisis, one should try and have 12 months’ living expenses in the emergency fund. This will give you a peace of mind and confidence to face any untoward situation. Right now, it’s very important to be prepared for future uncertainties. One should build an emergency fund of at least 12 to 24 months’ of their expenses, inclusive of their ongoing EMIs.
2. Get your health and life insurance in place:
If you don’t already have health and life insurance policies, then get them right away.
Make sure that you have a robust health insurance policy in place that covers coronavirus treatment.
3. Invest in mutual funds:
If you have the first two points covered, you can consider investing some money in mutual funds.
For low-risk investors and those with a time horizon of less than three years, debt funds work best. However, if you have a sufficiently high-risk appetite and a time horizon of 7-10 years, you can look at equity mutual funds. However, experts suggest splitting this into staggered amounts through SIPs rather than lump sums.
As experts have noted, first ensure that you have an emergency corpus as well as insurance cover in place. You can use your saved discretionary expenses to do this. If this is sorted, you can look at mutual funds and possibly equity funds if you have a high-risk appetite and long time horizon.
1. Build an emergency corpus: This is the first and foremost thing you should be doing with the saved money, particularly in an uncertain economic situation such as the present one.
Liquidity is a cause of concern in these trying times. people asking the question – how to get maximum return on an emergency fund. Keep it in a savings account and open a sweep account for the same or you can keep it in fixed deposits
Some banks allow parking money in FDs and automatically ‘sweep it in’ to savings accounts when there are debits from the latter. This allows you to earn a higher return than savings account interest.
Never expect any great returns on your emergency fund. You should be able to access the funds immediately. Learning from the ongoing crisis, one should try and have 12 months’ living expenses in the emergency fund. This will give you a peace of mind and confidence to face any untoward situation. Right now, it’s very important to be prepared for future uncertainties. One should build an emergency fund of at least 12 to 24 months’ of their expenses, inclusive of their ongoing EMIs.
2. Get your health and life insurance in place:
If you don’t already have health and life insurance policies, then get them right away.
Make sure that you have a robust health insurance policy in place that covers coronavirus treatment.
3. Invest in mutual funds:
If you have the first two points covered, you can consider investing some money in mutual funds.
For low-risk investors and those with a time horizon of less than three years, debt funds work best. However, if you have a sufficiently high-risk appetite and a time horizon of 7-10 years, you can look at equity mutual funds. However, experts suggest splitting this into staggered amounts through SIPs rather than lump sums.
As experts have noted, first ensure that you have an emergency corpus as well as insurance cover in place. You can use your saved discretionary expenses to do this. If this is sorted, you can look at mutual funds and possibly equity funds if you have a high-risk appetite and long time horizon.