Short answer: The money mistakes that hurt families most during COVID-19 were having no emergency fund, too little health and life cover, stopping long-term investments in panic, and borrowing expensively to cover routine expenses. The same mistakes repeat in any crisis, such as a job loss or a medical emergency. Build six months of expenses in liquid savings, insure properly, keep investing to plan, and borrow only from regulated lenders with a clear repayment plan.
Last updated: 13 October 2026.
This article was first written in 2022, when the pandemic was still shaping household budgets. In 2026 the specific pandemic relief measures are history, but the lessons are permanent. We have rewritten it as a practical guide to the mistakes people made during COVID-19, what has changed since, and how to avoid the same traps in the next shock.
What has changed since 2022
- Loan moratoriums were a one-time measure. In 2020, RBI allowed lenders to offer a moratorium on loan instalments for a few months. Interest kept accruing, so many borrowers who used it paid more in the end. There is no standing moratorium today; if you cannot pay, you have to approach your lender for restructuring on its own terms.
- The special EPF COVID-19 advance has been discontinued. Regular partial withdrawals for illness, housing, education and marriage remain; see our EPFO hub for the current rules.
- Health cover for seniors expanded. All citizens aged 70 and above, irrespective of income, are now eligible for up to ₹5 lakh a year of hospital cover under Ayushman Bharat PM-JAY.
- Digital lending is more regulated. Lenders must give a Key Fact Statement with the APR and can only use apps reported to RBI.
- Complaints have a new framework. The Reserve Bank – Integrated Ombudsman Scheme, 2026 applies from 1 July 2026 for complaints against banks, many NBFCs and credit bureaus.
Mistake 1: No emergency fund, or one that was locked away
The biggest lesson of 2020 was that income can stop suddenly. Families with savings in fixed deposits that could be broken, or in liquid funds, coped far better than those whose money was in property, long lock-in products or nowhere at all.
Example: Arjun (an illustrative example) spends ₹45,000 a month on rent, food, EMIs, school fees and insurance. Six months of cover is ₹2,70,000. If he has ₹60,000 today and saves ₹15,000 a month, he reaches the target in 14 months. Our emergency fund calculator does this maths for you.
- Keep it in a savings account, sweep-in FD or a liquid or overnight mutual fund.
- Do not count credit card limits or pre-approved loans as an emergency fund; they are debt.
- Single-income families and the self-employed should aim for more than six months.
Mistake 2: Under-insuring health and life
Many families learned during COVID-19 that an employer’s group health cover of ₹2–3 lakh does not go far in a serious hospital stay, and that it ends when the job ends. Others had no term insurance despite home loans and dependants.
- Buy a personal family floater health policy in addition to any employer cover. A super top-up is a low-cost way to raise cover.
- Term life cover of roughly 10–15 times annual income is a common rule of thumb; our guide to term insurance explains how to size it.
- Disclose existing illnesses honestly so claims are not rejected later.
- Check whether elderly parents qualify for PM-JAY cover.
Our insurance hub covers health, life and loan-protection policies in more depth.
Mistake 3: Panic-selling investments and stopping SIPs
In March 2020 stock markets fell sharply and then recovered within months. Investors who stopped SIPs or redeemed equity funds at the bottom locked in losses and missed the recovery. The lesson is not that markets always bounce back quickly, but that long-term money should not be needed during a crisis. That is what the emergency fund is for.
- Keep money needed in the next three years out of equities.
- Pause or reduce SIPs only if you genuinely cannot afford them, and restart as soon as possible.
- Rebalance once a year rather than reacting to headlines.
Read more in common mistakes made by SIP investors and how COVID-19 changed the way we invest.
Mistake 4: Borrowing expensively for daily expenses
When income fell, many people paid groceries and rent on credit cards, rolled over the balance, or took several small app loans to repay each other. This is how short-term stress becomes a long-term debt trap.
| Option | Typical cost | Risk in a crisis |
|---|---|---|
| Credit card revolving balance | Often 36–45% a year plus GST on interest | Balance grows fast; minimum due barely touches principal |
| Short-tenure app loans | APR can be very high once fees are included | Easy to stack several loans |
| Personal loan from bank/NBFC | Lower for good credit profiles | Fixed EMI; check you can pay it |
| Gold loan or loan against funds | Usually lower, secured | Collateral can be sold if you default |
| EPF partial withdrawal | No interest, but reduces retirement savings | Only for permitted purposes |
If you are already stuck, our guides on how people fall into a debt trap and EMI consolidation set out practical steps.
Mistake 5: Missing EMIs without talking to the lender
Some borrowers simply stopped paying and stopped answering calls. Missed payments are reported to credit bureaus and stay on your report, affecting loans for years. If you expect to miss an EMI, contact the lender before the due date, ask about restructuring or a revised schedule, and get any agreement in writing. Our page on how to improve your CIBIL score explains the recovery path.
Mistake 6: Not reviewing the plan after the crisis
Many people’s income, health and priorities changed after 2020, but their financial plan did not. Review your goals, insurance, nominees and asset mix once a year, and after any major life event. Write down three things: what you are saving for, how much risk you can actually tolerate, and what you will do if income stops for six months.
A crisis-ready money checklist
- Six months of expenses in liquid savings.
- Personal health cover plus term life cover.
- Nominees updated on bank accounts, demat, EPF and insurance.
- A list of all loans with EMIs, due dates and lender contacts.
- No more than one revolving credit product in use.
- Important documents scanned and shared with a trusted family member.
If you need to borrow, compare offers from RBI-regulated lenders and check the APR first.
Money stress is real. If anxiety about finances is affecting you, our article on overcoming financial anxiety may help.
Frequently asked questions
How big should my emergency fund be?
A common guide is six months of essential expenses, including EMIs and insurance premiums. Single-earner families, the self-employed and people in volatile jobs should aim higher.
Is there a loan moratorium available now?
No general moratorium is in force. The 2020 moratorium was a one-time pandemic measure. If you cannot pay, speak to your lender about restructuring; terms are at the lender’s discretion.
Can I still take the EPF COVID-19 advance?
No. That special advance has been discontinued. Other partial withdrawals, such as for medical treatment, remain available under EPFO rules.
Should I stop my SIPs when markets fall?
Usually not, if the money is meant for goals many years away and your emergency fund is in place. Stopping during a fall locks in lower prices and can mean missing the recovery.
Where can I complain if a bank or NBFC treats me unfairly?
Complain to the entity first. If it does not reply within 30 days or you are not satisfied, you can approach the RBI Ombudsman under the Integrated Ombudsman Scheme, 2026.
Sources
Disclosure: FundsTiger (Gatimaan Finance Advisors Pvt. Ltd.) is a loan marketplace and lending service provider for RBI-regulated lenders. Aparampaar Finance Pvt. Ltd. (Omozing), one of those lenders, is a related party of FundsTiger. This article is general information, not financial advice. Read your loan agreement and KFS before you decide.