3 Money Lessons We All Learned from the Coronavirus
As of June 11, 2020 (the time of this article’s writing), the United States is in month 3 of its battle against COVID-19.
Here’s what has happened so far:
- More than 2.1 million Americans have contracted the disease, and more than 115,000 of them have lost their lives1.
- More than 100,000 small businesses have shut down for good2.
- 33 million Americans have filed for unemployment3.
- As of June 6, 42% of the U.S. population have been fully vaccinated.
There is still a lot to learn about this coronavirus, but one thing is clear: COVID-19 will have a lasting impact on how we work, play, and live. It will certainly impact the way we, as Americans, handle our money. In this article, we’ll explore some of the money lessons that the coronavirus has forced us, as Americans, to learn.
Emergency savings are a requirement, not a choice.
It was no secret that a recession was on the horizon. The United States was experiencing its longest bull run in the history of the stock market. As the old adage says, “what goes up must come down.” Economies are inherently cyclical, and we were long overdue for a market correction.
That being said, even the best finance experts could not predict that a microscopic organism would bring the global economy to its knees. Nor that the traditional economic band-aids – stimulus checks, lowered interest rates, and business incentives – would not, could not, be enough to bring consumers back to the shopping mall. This type of economic shutdown was completely unprecedented.
And therein lies our point.
You’re never going to be able to predict the exact nature of your next financial emergency. But what you can count on is that it will happen, eventually. Without a cache of emergency funds on hand, you will be forced to cash in on your investments or succumb to high-cost borrowing. Either of these actions will have significant repercussions for your long-term goals.
If you were financially unscathed from COVID-19, congrats. Use this piece of good fortune as an opportunity to pad your emergency savings. Instead of the traditional 3-6 months’ worth of living expenses, consider holding at least 6 months’ worth of cash.
Your estate plan cannot wait.
Look, we get it. Pondering your own imminent death isn’t fun. But here’s the thing – each of us will face death at some point. If COVID-19 has taught us anything, it’s that this disease does not discriminate and it can take down otherwise perfectly healthy people and those with pre-existing conditions.
So do your family a favor. Instead of forcing them to pick up the pieces of your finances while grieving, prepare for this possibility ahead of time. This means (at the very least), creating a will, establishing a living trust, setting your health care directives, and authorizing your financial power of attorney. This pandemic may be frightening, but you can sleep easier knowing your family will be taken care of, should the worst happen.
Luckily, online technology has made estate planning much more simple. For example, our partner Trust & Will allows customers to build an online and legally valid will within minutes. This includes HIPAA authorization, healthcare preferences, and authorizing a power of attorney. Since the start of the pandemic, demand for Trust & Will’s estate plans have more than doubled, as Americans clearly understand the need for preparation.
If you’re an Axos Bank customer, you can get 15% off when using Trust & Will’s estate plans. Just visit https://trustandwill.com/axos.
Less expenses = more savings.
One clear advantage of a national shutdown? A return to home economics.
Americans are cutting their own hair, manicuring their own nails, and cooking their own dinners. Gym memberships and yoga studios are also being ditched for online classes. And you can now host your next happy hour virtually with the help of Zoom.
The result? Forced savings. That’s right – Americans are saving an average of $219.17 per month due to the coronavirus. Depending on your financial situation, this may not seem like much. But annualized, it could mean up to $2,630 per year. What would your savings account look like with an extra $2,630 per year? Or, even better, your 401(k)?
Our point is this – the coronavirus is forcing Americans to cut back on their expenses. And perhaps that’s not a bad thing (see Lesson One, above). If coloring your own roots or hosting your own movie nights could mean an extra $2,000+ per year in savings, wouldn’t it be worth it?
When the economy reopens, consider keeping your expenses low. We’re confident that your future self will thank you for it.
COVID-19 will have lasting effects on all aspects of American life – including how we manage our money. From emergency savings and estate planning to haircuts and gym memberships, we foresee a more prudent style of money management in the future.
And that’s okay.
We hope this pandemic encourages you to take a more mindful approach with your money. To learn how Axos Bank can help you achieve better financial wellness, we invite you to browse our tools and services here.
- “Coronavirus Disease 2019 (COVID-19) – Cases in the U.S.” U.S. Center for Disease Control, June 16, 2020.
- Guzman, Joseph, “More than 100,000 small businesses have permanently closed due to coronavirus, study estimates”, The Hill, May 13, 2020.
- Cohen, Patricia and Hsu, Tiffany, “‘Rolling Shock’ as Job Losses Mount Even With Reopenings”, The New York Times, June 11, 2020.
3 Money Lessons We All Learned from the Coronavirus
This blog post was published by Axos Bank on July 10, 2020 and last updated on July 14, 2020