This week, the UK government set out tentative plans to relax coronavirus restrictions and reopen the economy, bringing much-needed optimism and hope to a weary population. I thought it might be useful to reflect on what the pandemic has taught us all about money.

The Emergency Fund

The pandemic has caused millions of people to experience a loss of income. Those who had a fully-funded emergency fund could meet essential living costs and take off the pressure. Holding cash equal to between 3-6 months' essential living costs will help you weather any future financial storm.

Stock Markets

World stock markets dropped nearly 40% by mid-March 2020. Those who sold out because they panicked or just needed the cash to meet living costs missed the rebound, which has seen markets exceed previous peaks. Leave long-term money alone and don't invest money in equities you might need to access in the short term.

Compounding

The infamous R-Number has starkly illustrated the power of compounding by showing how infections quickly multiple. The same happens with reinvested investment income. It takes a while to build a base of capital, and then investment growth is exponential, which I explain in this video. As Charlie Munger said, 'The first rule of compounding: never interrupt it unnecessarily.

Productivity

With more people working from home, many now realise how much time and money they waste commuting. Employers are likely to be more open to flexible and home working for those roles where it is feasible to do so. It may also change the housing market dynamics with lower demand for expensive commuter belt homes and smaller city-centre apartments.

Fun Spending

Not having as many opportunities to spend on discretionary things has shown millions of people how much money they waste. Setting limits on fun spending could permanently free up cash for faster debt repayment or additional savings while still allowing a degree of fun.

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Financial Opportunities

Businesses and tradespeople involved in home improvements are working flat out to meet demand as millions look to improve their home and provide workspace. Online coaching, training, and personal development are booming. There are lots of business and earning opportunities for those who are well prepared, resourceful and adaptable.

Home Sweet Home

Converting the loft, adding an office outbuilding or extending the home are all good ways to improve your quality of life and improve your home's value. In a world that might be less geographically relevant, living in a cheaper area might make a larger property or garden more affordable.

Tax Incentives

The current Stamp Duty exemption on homes purchased in England and Wales has seen the value of many properties rise by more than the tax saving. There is also evidence that homes bought under the Help to Buy (HTB) scheme are between 15-25% more expensive than similar homes that don't qualify for HTB. Tax and other incentives can lead you to make poor financial decisions, so look at the big picture.

Income Diversity

Those working in the hospitality, leisure and holiday sectors have learned the hard way that when your income is entirely dependent on one source, you are financially vulnerable. Build up a larger emergency fund or, better still, build multiple sources of income.

(Un)Happy Shopper

Boredom, depression, anxiety and feeling insecure can all cause an emotional void that can lead to a desire to buy unnecessary things. These emotions are likely to have affected many more people during the COVID lockdown.

When combined with excessive exposure to TV and internet advertising and the ease of online shopping, wasting money has never been easier. Keeping mentally and physically well and deciding in advance where you want to spend your money each month are your best defences.

No one knows precisely how the COVID situation will play out, but there are cautious grounds for optimism. My thirty years of studying personal finance have taught me that it's best to learn from the past, plan for the worst, and hope for the best when it comes to your money.

10 Things Covid-19 Has Taught Us About Money