What can you do with the money you saved during the pandemic2 min read . Updated: 21 Nov 2020, 10:27 AM IST
From creating an emergency fund to investing it towards a goal, there are a multiple ways to put this money into good use.Avoid making random purchases.
With no places to go and splurge during the lockdown, many of us ended up saving a good amount of money. If you are one of the many, you might be wondering how this money can be put into good use instead of making random purchases.
You can build/increase your emergency fund
Covid-19 pandemic has taught us how important it is to have an emergency fund. With job-cuts and pay cut, many had to dip into their savings for monthly expenses. Now, for someone who had an emergency fund, it acted as savior.
As the name suggest, emergency fund or a contingency fund is a fund kept aside for an emergency. It is a good practice to keep at least 3 to 6 month's expenses as your emergency/contingency fund.
Now the money saved during the pandemic can be used to create or increase your emergency fund. "Even those who had an emergency fund might have felt the need for a slightly larger fund," said Amit Trivedi, certified financial planner, personal finance coach, author of Riding the Roller Coaster.
Invest for increasing your retirement corpus
For millenials, retirement is still a far-off idea, but it always makes sense to start saving for retirement early on. This is mostly because of two reasons - increased life expectancy and inflation! Let's understand how.
Suppose you are 40-years-old and your monthly essential expenses are ₹30,000. In another 20 years when you will retire the same expenses would be ₹80,000 at 5% inflation rate. And, if you live for another 20 years after retirement, how do you plan to manage your expenses without enough savings.
It is essential to have a concrete investment plan to build a retirement corpus, "but this money can be added to strengthen ones retirement portfolio further," Trivedi added.
It never hurts to make an extra investment, especially for retirement!
Save it for a short or mid-term goal
Short-term goal: With access to credit, like credit cards and personal loan, we often resort to it to fulfill our short-term goals. From planning a trip to buying a phone, today, we are more comfortable about swiping our cards than saving for such a purpose. However, what we do not realise is we end up paying more for using credit options for such purchases with interest components added to it.
Now with some money saved in hand, you can actually plan ahead for a trip or a purchase. Perks? You don't pay extra as EMIs.
Mid-term goal: You can also invest this money for fulfilling your mid-term goals like making a downpayment for a house or a car.
A lesson that a lot of people learnt during the pandemic is that we were fortunate to have a job, Trivedi said. "But millions of people had no source of income during this crisis. So can we contribute some of this money to help the less fortunate?, Trivedi concludes.