Pandemic changed finance rules
The pandemic highlighted how black-swan events can hit an erstwhile financially secure person.
Four years ago today, many of us were watching something we didn’t understand start to unfold. A new disease was emerging from China and was killing people.
I was on my way to Brazil for Carnival, and the potential for getting sick, getting stuck there, losing my income, seeing investments crash, or other horrific consequences was registering on my radar.
Little could we imagine how the next three years would play out. New language such as: lockdown, superspreader, managed isolation, social distancing, viral load, and of course RAT entered our lexicon. The ensuing pandemic also changed our finances in many ways.
One of the most immediately obvious effects of the pandemic on our personal finance was insurance. Those of us who were overseas or had booked travel were in for surprises. Our family made it home with relative ease, albeit laced with anxiety. For many, the insurance premiums they’d paid weren’t worth a bean, or they had to argue long and hard for the support they’d expected.
As someone who reads insurance policies before travelling, I was aware the word “pandemic” appeared in the exclusion lists.
But it was one of those risks, like war and insurrection, that you never really expected to happen to you.
That fine print came back to haunt many Kiwis who found their flights, cruises or holidays of a lifetime cancelled, with no way to claim. If their policy didn’t specifically exclude pandemics, there was no
doubt there was an exclusion for borders closing or government donot-travel orders.
The insurance industry, which blustered on about pandemics being uninsurable at the time, has, lo and behold, found ways to offer cover. Without it, people weren’t going to travel.
Should there be a next time, policies still won’t cover governmentmandated lockdowns. But they will at least cover your health and personal ability not to travel should you or a loved one get sick.
Another financial change from the pandemic is the be-kind-and-don’tjudge message.
I tied kindness in with not judging because shaming people for less thansensible
personal financial decisions doesn’t do any good at all. A classic one is scam victims who are retraumatised by the reactions of others. Anyone can get caught.
The security of many jobs came into question in those first few weeks of the pandemic in particular. While some of us had our incomes slashed or lost jobs completely, others were in a better position financially with a full income, and reduced expenses from staying home.
The pandemic highlighted how black-swan events can hit an erstwhile financially secure person.
During the first lockdown in particular, many more people than before discovered Sharesies, and crypto. Stuck at home for months, thousands of Kiwis started investing like there was no tomorrow — often taking large risks. Some did well. Even those who made mistakes have learned from them. Making small financial mistakes can be highly valuable in the long run. Unfortunately, some plunged more than they could afford into questionable investments.
Another thing many realised for the first time, thanks to the pandemicfuelled property market, was that house prices could go down as well as up. I’ve lost count of the number of “experts” who throughout the 2000s and 2010s repeated ad nauseam that property prices never went down, just sideways. Ask anyone who bought a home in 2021 if that’s true.
The concept of emergency funds got a boost during the past four years. The pandemic, and in particular the first lockdown, hit home the risks of losing your income.
If the foodbanks were anything to go by, a lot of people were the proverbial three weeks away from financial disaster when the country went into lockdown. That gave clarity to the importance of having that instantly available cash.
Some people learned a lesson about stock markets and KiwiSaver. On February 20, 2020, world stock markets crashed. Too many ordinary New Zealanders panicked and switched from growth to conservative funds at the bottom of the market, locking in any losses. Those who held on saw values recover by April 7. Financial Services Complaints Limited heard a complaint from a KiwiSaver member who switched at the very worst time. The case notes are an interesting read and spell out the problem with switching in turbulent times. You can read it at: https://fscl.org.nz/case-studies/ locked-in-losses-kiwisaver-and-thepandemic-panic/