Financial Planning

How to Balance Saving and Investing During COVID-19

. 4 min read . Written by Vanshika Goenka
How to Balance Saving and Investing During COVID-19

Kool Kanya brings to you FUNDamental – a series on women and money that will help you slay the finance game in tough times. This series is in collaboration with Basis, an app that powers financial independence for women through impactful content, supportive communities, and expert advice.

More often than not we assume saving and investing are the same financial activity. While in reality, they are as different as ordering food at home and dining at a restaurant. Both help you satisfy your hunger, but both options serve different purposes.

What’s the difference between saving and investing, and how is each of them beneficial?

Saving is the simple act of accumulating money – the difference between what you earn and what you spend, that is kept aside for future use.

Savings help provide for future emergencies or any specific short-term goals like providing for medical or other emergencies. The aim of saving money is to keep it liquid, hence, accessible.

Savings can be in the form of cash in hand, or money deposited in your savings bank account. Savings earn a very nominal interest in a bank account but the money is typically safe and faces little or no risk.

Investing, on the other hand, is putting your savings into financial products so that your savings grow and create wealth over time.

This wealth can be used to meet future financial goals. When you invest money, you put it in instruments such as stocks, bonds, gold, real estate, mutual funds, etc.

Investing money allows you to earn returns but also poses risks depending on the duration for which you are invested and the inherent risks of products themselves.

While both saving and investing are important, what happens to your savings or investments if you’ve lost your job or gotten a salary cut or are afraid you’re going to lose your job?

How to save and invest during COVID-19

The current times can be tricky and staying ahead is all the more important. In times of crisis, the best thing you can do is first evaluate how much of your liquid savings you’d need to stay afloat, and then factor in your investments. So if you sense instability to your job, here are some things you can do to ensure that your savings and investment don’t receive a fallout.

  1. If you have faced a salary cut, make sure that you know if this is short-term or long-term. If it is long-term, it is going to affect your saving and spending habits entirely, so it’s best to know to plan better. Clear your doubts with your immediate manager or with your HR team. Consider a career change if you think your career prospects overall aren’t looking great post-COVID.
  1. In case you were planning on buying a car or taking a loan for a house, push those goals by a few months. Now is the time for you to stabilise and taking on new loans might not be the best idea.
  2. We all save to help us tide through tough times. But sometimes, it is okay to let savings take a back-seat.  In case continuing your SIPs or other systematic investments is a stretch at the moment, you could lower the amounts or pause them for a while.
  3. Make sure you have a strong emergency fund that can help you tide through these tough times. Try to not touch your investments and if you can afford it, continue clearing out debt, if you have any. Use your savings account for the same.
  4. Cut down on unnecessary expenses and start journaling all the incomes and expenses. You’d be surprised how much money you can save just by writing out your expenses. 

Once you have the above-mentioned covered, you can focus on investing towards important financial goals – be it building a retirement corpus, an education corpus for a child or buying a house.

Bottom Line

Understanding the importance of saving and investing is important as it can help us plan our short-term and long-term goals accordingly. When you save, you know that you are putting aside money for a rainy day. But when you invest, you are creating wealth that will help you achieve your financial goals.

Basis helps you get started on your journey to financial independence with curated content, supportive communities, and expert advice. Visit our website here.

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