Protecting your financial future in times of crisis
Do you know how your money’s protected How is your money protected in an emergency and what you can do now for your future and security. With these 9 points you can avoid uncertainty and prepare yourself.
Life has changed since the advent of the coronavirus. While we try to shape our new everyday life around home working and home deliveries, the financial markets are in a state of turmoil. The long-term consequences for the economy, and society, can’t be really assessed yet.
Historically, economic recession has a disproportionate effect on women. Even though ‘finance’ doesn’t really seem to be the most urgent thing to deal right now, reducing uncertainty, planning for the future, and avoiding mistakes that cost money later will help in the long run.
Are women more affected by financial crises than men?
Although every crisis is unique, historical studies show that they tend to affect women more than men in the long term:
- Women lose their jobs earlier, e.g. if certain economic sectors in which many women work are more effected or if part-time jobs are reduced more quickly.
- Women become more financially dependent through loss of jobs, reduced wages, etc
- The losses have a more serious impact on the smaller pension assets of women
- Women’s unpaid workload increases even more, as many take care of children and family members; childcare costs and organisational time can also increase, hitting single parents particularly hard
- Women are increasingly be classified as a riskier group when they look for loans and capital investment
Since many women have savings, the immediate turmoil in the financial markets almost passes them by. But in the long run, they are the losers by keeping their savings in a place with such low interest rates.
When women do invest, their portfolios are generally more resistant to crises.Women often invest for the long term and have lower risk profiles. In many cases they invest along lines that look to the future, such as sustainability, which so far seem to be surviving the current turmoil a little better.
How is your money protected?
What happens to money in the bank if the bank goes bankrupt? For example, what is the bank loses money it has lent as companies go bust?
In such a worst-case scenario, in Switzerland depositor protection schemes come into play: each banking customer is covered for CHF 100,000 per bank under bankruptcy law. No matter how many accounts you have at each bank, the total amount of money covered remains the same. So if you have more than 100,000 francs, spread it over several banks.
For savers in the UK, banks, building societies and credit unions regulated by the Financial Conduct Authority (FCA) are covered by the Financial Services Compensation Scheme (FSCS). If you have a UK-regulated current/savings account or cash ISA, £85,000 is protected per person, per financial institution.
But what about an online tool like a robo-advisor? Your money is not held by the robo-advisor itself, but in a deposit account with a partner bank. So if the robo-advisor becomes insolvent, your assets will remain in the bank and enjoy the appropriate protection.
Nine ways to protect yourself
Get an overview of your situation
Tax return, prepare a budget and/or adapt it to your current situation.
Talk to your partner and/or family about money
Clarify how everyone’s finances are organised, including older relatives.
Check your coverage
Find out what insurance and other benefits (e.g. from employers) are available to you and your family.
Update (or create) important documents
This could be your will or your Living Will
In Switzerland? Check your pension fund and pillar 3a
The non-mandatory part of your pension fund might be invested in very different ways - check what your plan looks like, the options available, and what actions your employer may take. Even with pillar 3a, it’s worth checking whether the chosen strategy and risk profile still make sense for you, or whether you should open an additional 3a account.
Check your personal “safety buffer” savings
If you don’t have any, start building them if you can.
If you have investments, keep calm
Don't follow the herd blindly – stick to a long-term strategy and check other investment opportunities like alternative investments (e.g. gold)…and check costs, as there may be cheaper offers.
If you want to invest now, make it for the long-term
Make your choices as broadly diversified and as cost-effective as possible. And consider themes that are oriented towards the future.
Check whether your financial provider still fits your needs
Does your provider keep you informed about what’s happening and what it means for your money? If you’re not satisfied, change. A good financial provider comes into their own in times of crisis.
In this uncertain time, it’s important to be transparent about your finances, prepare and react sensibly. This is especially true for women. Now we’re more likely to be responsible for our own financial future.
So keep asking questions, and share your experiences – nobody knows everything about money and nobody can predict the future in the financial markets. Our best chance of success is to work together.
This article has been produced in partnership with watson, a Swiss news platform.
Here is the link to the original blog article in German.
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