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MCO 2.0: Here's Why You Should Save up for a Pandemic

Updated 18 Jan 2021 – By Philippe Andrews

There's been a sharp downturn in Malaysia's economy as of late, as experienced by various industries across our economy - such as the local manufacturing sector, which recorded its lowest production volume level since 2016, 48.4% in March 2020 - the first month of the pandemic.

The reason for this worrying trend? A pandemic that has both claimed thousands of lives across the world in just a matter of months, called COVID-19As of December 2020, the production volume level for the manufacturing sector has increased up to 49.1% - slightly higher but still worrying.

It’s also the reason why many of us are constantly worrying about our financial health at present. While some sectors have been able to continue working and functioning from home, others — like tourism and the performing arts — have been shut down or suspended entirely, leading to concerns about income and savings.

However, there’s an even bigger takeaway that we should pay attention to in this scenario, and it revolves around the following question: Do we need to save up for pandemics in the future?


First, what is a pandemic?

To put it simply, and according to the World Health Organisation (WHO), "A pandemic is the worldwide spread of a new disease." It’s a larger version of an epidemic or an outbreak although all three phenomena happen at a fast pace and across big areas.

Now, it's easy to tell these are all devastating affairs. What may come as a surprise to many, though, is that pandemics, epidemics and outbreaks are more common than we think.

Nipah Virus

For example, Malaysia faced an outbreak of the notorious Nipah Virus in 1999, while Bangladesh and India have been continuously battling outbreaks of the same virus since 2001. The Severe Acute Respiratory Syndrome (SARS) was an epidemic that spread across 26 countries in 2003, and H1N1 (Swine Flu) and H5N1 (Avian Flu) outbreaks are still prevalent today. 

Concurrently, the Bubonic Plague — which brought about the Black Death pandemic that consumed millions of lives in Europe and Asia during the 1300s — is still affecting parts of the world today.

These observations tell us that virus outbreaks do indeed happen more regularly than some of us may believe and that us being unaware of them does not mean that they aren’t happening — or that the pandemic, epidemic or outbreak has stopped.


So, how does pandemics affect finance?

After going through the section above, it would be correct to say that outbreaks shouldn’t be overlooked when we make plans for our savings and investments.

As personally experienced by Malaysians in March and April 2020, things can be even more alarming when we’re dealing specifically with a pandemic. A lockdown or Movement Control Order (MCO) may come into effect, which could decrease our income levels — or eliminate the sources of income for some individuals

The economic effects of this current COVID-19 pandemic are not a trivial matter either, as aforementioned. The World Bank recently revised its predictions for the Malaysian economy in 2020 and estimates that we will experience a downward economic growth of negative 0.1%, signalling the start of a possible recession.

As a result, we are now forced to rely on our savings to survive — and this trend will likely continue for quite some time.


Unfortunately, a regular savings plan may not be sufficient to help us in this situation.

Consider this example. 

Rahman works in tourism and earns RM4000 a month. He normally saves RM500 a month and has been doing so for years with the assumption that in the future, he wouldn’t encounter a situation that would use up his savings entirely without being able to earn any income for a long time. 

Even if he is unemployed, it would only be for a short while — and when he retires, he would have saved up enough money to sustain himself and his loved ones for years to come.

Suddenly, a pandemic comes along, and a lockdown is officiated to help combat the spread of a deadly virus. This lockdown requires Rahman and his family to stay at home entirely, and he is unable to work from home due to the nature of his business. His source of income is thus eliminated indefinitely, and he is forced to rely on his savings to survive.

But, what if the lockdown goes on for longer than just a few months?

Additionally, once the lockdown ends, Rahman may still be jobless for quite a while as the economy recovers and his industry builds itself up again. This could translate into more months of unemployment without any income.

Yes, this is an extremely simplified illustration of the situation that is currently being faced by many Malaysians. However, if you are experiencing some variation of this, this would be a good chance for you to understand that pandemics, epidemics and outbreaks are very damaging situations that can happen without warning and for indefinite lengths of time — which means that you should take the time and effort to prepare for them financially.


How to save for a pandemic?

As a simple savings plan MAY NOT be enough to do the trick for a pandemic, why not consider investing a small part of your monthly income instead? Alternatively, if you’re a freelancer, why not save up a small portion of each payment you receive, before accumulating those portions and investing them?

For instance, you could invest in stocks, particularly those of companies which sell essential goods and services like food and medicine. It is unlikely that these companies will experience massive fluctuations in their valuations during outbreaks, as there’ll always be a demand for them — which means you could sell these stocks at a profitable price before or during a lockdown.

You could also invest your money in a fixed deposit with a short maturity period, such as 6 months. This means that you will be earning a small but noteworthy amount of interest at the end of that period. If there are no signs of a pandemic or outbreak coming after those 6 months, you can invest further in another fixed deposit with a similar maturity period.

Another option would be to channel your money into retirement savings plans, like the Employees Provident Fund (EPF). The institutions responsible for these plans may sometimes allow members to withdraw sums of money that they have saved under those plans to be used in emergencies like outbreaks and pandemics. 

These measures can also complement financial assistance packages offered by governments in times of crisis, such as the Bantuan Prihatin Nasional scheme being offered by our very own administration at present.

The trick here is to ENSURE that your money IS NOT just sitting idly in your bank account...

With a little bit of research and by asking around, you will be able to find yourself a few reliable and unique investment tools or plans which will allow you to grow your savings and also keep them within reach for emergencies.

Above all else, the best way to prevent your financial health from being too severely derailed by a pandemic, epidemic or outbreak is to combat and end the spread of the disease or virus itself. 

In the case of COVID-19, the more we listen and answer the call of our authorities to stay home, practice social distancing and maintain excellent hygiene, the faster we will overcome the challenges posed by this pandemic!

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