How has Covid-19 helped our financial literacy? We are living in a time where things are uncertain. If 5 years ago, someone had told you or me or anyone that we would be stuck in our homes for almost a year, and the world would come to a halt- we would think that person is crazy. But here we are, stuck inside our homes in lockdown, or slowly emerging from one.
Covid-19 taught us financial literacy
Covid-19 taught us something valuable- that life is uncertain. Anything can happen, and things are not always in your control. So living your life at the moment is extremely important.
I have known people who saved every penny they have, waiting for that “one right moment” where they would let loose, but in that quest- they got trapped in the rat race, their typical nine to five routine. I totally agree that saving isn’t bad at all, it’s logical. But people often forget the purpose they started saving in the first place- to spend it. On your kid’s college fees, or that one dream vacation, or your ideal house or whatever.
Once people get their 9 to 5 jobs, start saving and they get caught in that tedious routine. Earning, saving, spending. But they never really spend it for their pleasure.
I read “Rich dad, poor dad” by Robert Kiyosaki some days ago, and this is one of the key points he highlighted in the book. People earn a reasonable income and save it, but they get trapped.
Let me demonstrate my point by presenting to you two scenarios.
It’s 2015. Adam has a typical 9 to 5 job. He has a B.Tech from a good college and works as an engineer in a decent company. He earns a decent amount too- let’s assume 16 lakhs INR (approx 21.5K USD) He has got a family, and two children. How much of the total income invested is sent in daily expenses, children’s tuition, their college funds, house loan, mortgage payments, car loan, etc. The rest of the little money left is spent in taxes and banks as savings.
The second scenario- It’s 2015. Halley also has a 9 to 5 job, and a family. Let’s assume she earns the same amount of income as Adam. Much of her income goes into taxes, house rent, children’s tuition, car loan, etc. Out of the rest, a part is in the bank as savings, and the rest is invested in stocks and real estate.
Now let’s jump 5 years ahead. It’s 2020. Covid has hit the world, and a lockdown is imposed. Everyone is doing work from home. There has been some rise in Halley and Adam’s income, but so has been in the expenses as well. Their expense pattern is pretty much the same as before.
Now due to covid and dropping economies, companies are low on resources and so there has been a pay cut. Adam finds himself struggling with expenses, but for Halley, the income pay has been replaced by some extra amount she made from stock and real estate investments.
These 2 scenarios present to us people we see in our everyday lives, and their expense and income patterns. We all know many Adams and a few Halleys too.
Covid-19 and financial literacy
Logically investing your income in assets that will generate money for you is smart. Spending all your income on taxes and expenses isn’t smart.
Students should be taught basic financial literacy and during high school and college years, they should learn more about stocks, real estate investments, bonds, etc. which are assets that will generate value.
Covid 19 pandemic taught us that smart work in financial aspects pays off, whereas if you’re caught in the rat race, you just get stuck and you can’t move on.