How to Safeguard Your Savings During Uncertain Financial Crisis?

With the global economy showing warning signs of an upcoming recession, there's a rising concern among individuals to protect their finances. An economic slowdown is typically marked by job loss, salary cuts, and lack of investment opportunities as the demand decreases and market volatility intensifies. The value of investments and savings decreases, and expenses shoot up.

In such uncertain times, when it can get tricky even to make ends meet, you need a solid financial foundation to fall back on. Fortunately, there are plenty of ways to protect yourself against uncertain financial crisis with the right savings and investment strategies.

Here are some tips to safeguard your finances during economic slowdowns.

1. Create an emergency fund

When it comes to preparing for a financial crisis, building an emergency fund has to be your top priority. An economic slowdown can put tremendous pressure on your finances, especially if you're let off during this time. While your investments can be your source of income during these times, they don't offer you enough liquidity.

As a result, it makes sense to build a nest egg to manage any financial emergency seamlessly. Ideally, your emergency fund should be large enough to cover your finances like household expenses, loan EMIs, medical bills, and more for 6-12 months. Consider putting your extra funds in t in instruments such as FDs or short-term debt funds that help you grow your funds while keeping them secure.

2. Diversify your portfolio

One of the most important things you can do to prepare for a financial crisis is to invest wisely. You need a well-planned framework to invest and protect your funds for maximum gains.

To make the most of your investments, make sure your portfolio is diversified across different financial assets like debt, equity, gold, and global markets. While doing so, you must research and understand the level of risk reward and performance cycle of each asset class.

For instance, having all your funds invested in equity across sub-asset classes like large-cap to small-cap funds might not offer you much protection, as each class will witness a decline. Whereas exposing your portfolio to other asset classes like international funds, debt, or gold can help you minimise the impact of a falling market.

4. Continue investing in SIPs

SIP is a systematic medium to a long-term investment plan that lets you invest in your preferred mutual fund scheme. When you are experiencing an economic downturn, the NAV of your mutual fund can decrease and discourage you from continuing with your investments.

However, most SIPs tend to bring investors more units during such times. In the long run, as the economy recovers, these units will only lead to a huge corpus. As a result, it is recommended to keep your SIP investments during a crisis long enough  for them to be able to generate the gains you're expecting.

5. Consider gold investments

Apart from equity and debt investments, don't forget to diversify your portfolio with at least 5-10% of investments in gold. This is because gold and currencies have a negative correlation, which means gold can maintain its value in the long term and offer a hedge against inflation.

In fact, you can now consider gold funds instead of physical gold to protect your savings. In essence, gold funds are mutual funds that invest in various types of gold – either physical gold or stocks of gold mining companies. These investments not only eliminate the hassle of storing the gold safely but offers you high liquidity during a financial crisis.

6. Get Health Insurance

When the stress of saving your funds is already high, a medical emergency can catch you off-guard. The rising medical costs and hospital bills can add to your financial strain if you are not prepared for it in advance. As a result, opting for health insurance coverage can offer you much-needed financial relief.

With an individual health insurance plan, the insurance company will cover all the medical costs of the policyholder when a medical emergency hits. So, to better protect yourself against a financial crisis, make sure to protect your family and finances with ample insurance coverage.

To sum up

A financial emergency can strike up at any time. And if you don't plan prudently, it can leave you struggling to make ends meet. So, consider building emergency funds, invest wisely and create a well-diversified portfolio with gold investments and SIPs. Additionally, opt for insurance plans to safeguard your family against any major medical or financial emergency.

And while you're looking to start your investment journey, seek the assistance you need with Tata Capital Wealth. Our experts can help you identify the best investment options, health insurance plans, and mutual fund schemes that meet your financial goals seamlessly.

For more information, check out our website.