In the past week, the number of U.S. COVID-19 cases surged from a handful of incidents in a number of states to hundreds of cases throughout the country. And that has communities scrambling to not only make sense of the numbers but also figure out what needs to be done to keep Americans safe.
Many are promoting good hygiene as a means of protection, and that's good advice, but limiting the spread of this virus may boil down to a heavy degree of social distancing -- keeping people away from other people. And the impact of that could have devastating financial results.
The financial impact of coronavirus
COVID-19 fears have sent the stock market on one of its wildest rides in history, and Monday's open was brutal -- so brutal, in fact, that trading was paused for a period of time. Still, investors who leave their portfolios alone are in a good position to ride out the storm unharmed. After all, money is only lost in the stock market when investments are sold off, so those who sit tight can hopefully endure this latest wave of volatility and avoid a hard hit.
But while you may not have to worry about your stock portfolio tanking due to the coronavirus, your near-term finances may be a different story. The social distancing we just talked about? It could take on different forms. In some cases, it could mean closing schools for weeks on end and moving to online classes. In other cases, it could mean closing down offices and places of business. None of this is good for people who risk losing wages as a result.
Imagine you have young children and you learn that they won't be able to attend school for a number of weeks. Even if your office remains open, suddenly, there goes your paycheck. The same holds true if your company tells all non-essential personnel to take the next few weeks off -- without pay. Just like that, you have to worry about covering your near-term bills.
It's an unquestionably frightening situation for everyone. But all may not be lost if you have emergency savings.
An emergency fund could be your lifeline
There's a reason we're told to sock away three to six months of essential living costs in the bank. You just never know when a financial emergency might strike, and without savings, you risk falling behind on your bills, racking up debt, and struggling to pay it off for years.
Now when we think of typical emergency situations, it's easy to image home repairs or layoffs at work; usually, our minds don't land on global health crises and citywide shutdowns. But it just goes to show that financial emergencies can take on many forms, so it's always best to be prepared.
What if you don't have an emergency fund as of today? Start saving as much of your earnings as possible. Cut back on non-essentials and bank the rest. It's really the best you can do.
We don't know what the coming weeks have in store. We may see even more market volatility coupled with widespread school and business closures. We could also see small businesses take such a large financial hit that they struggle to recover. Be smart about padding your savings account as things unfold, and make every effort to leave your stock portfolio and retirement savings alone during this turbulent period. Ideally, things will start to normalize once health officials gain a better understanding of COVID-19 and how to treat and contain it. But for now, the best many of us can do is sit tight and keep washing our hands.