Protecting your Finances from the impact of COVID 19
By Emmanuel Allottey
The global outbreak of COVID-19 has had devastating effects on many nations’ economies with an even greater impact on households. Government interventions to curb the spread of the virus such lockdown’s have led to many businesses operating on reduced hours or closed entirely translated to decreases in income, spending, savings and wellbeing of many individuals.
Individuals are now faced with making financial decisions as well as taking precautionary measures to protect their finances from possible deterioration due to the impact of COVID 19.
According to the World Bank, Sub-Saharan Africa has the lowest savings rate in the developing world with an average of 18 percent of gross domestic product. A major contributing factor to this statistic is inadequate access to financial services. In addition, further surveys show that out of 54 percent of adults that report to save regularly, only a quarter of savers used formal methods such as an account at a bank or at a formal financial institution. The interest rates paid on saving accounts are insignificant causing little incentive to save.
Government interventions through monetary and fiscal policies such as bank rate reduction have created a low interest rate environment in many countries. The use of Financial products can mitigate the impact of low interest operating environment and declining household income.
Financial products such as term deposits offer the possibility of protecting your savings against fluctuation in interest rates. A term deposit is a cash investment with a Financial Institution that offers a fixed rate of interest over a fixed amount of time. The interest is guaranteed not to change for the agreed period of time and can only be withdrawn at the end of the period or earlier with a penalty attached. This financial product provides the security that if interest rates should move lower the investment return is secure.
Insurance products such as retrenchment cover, job loss insurance offers income protection benefit that pays your salary for up to a predetermined period if retrenchment from work occurs. The spread of Coronavirus threatens to accelerate the rate of unemployment in the many countries. The use of an appropriate insurance policy will assist during financial exigencies.
Financial decisions are more crucial during COVID 19. Before you make any financial decision perform due diligence required by researching the specific nature of the product. Contact your nearest financial advisor and protect your finances.