The Potential Economic Impacts of COVID-19 on Families and Small Businesses

According to, there are about 4 key imperative during the COVID-19 pandemic.

I don’t disagree with them.

I’d like to add though that having stable emotional and spiritual wellness might be the most vital aspects for families and small-business owners to have during this pandemic.

Emotion and spirituality might not directly talk about finances and the economy; however, they surely have an impact in how life’s going to be moving forward.

Stable emotional and spiritual wellness can spring forth hope, peace of mind, peace in the family despite the current situation, and courage that we could make it through despite all odds.

Even before COVID-19, adequate income and liquidity have not really solved many of our concerns in life and in our family. Though they may be worthwhile by-products of our labor, they could not bring us peace of mind, love, courage, and hope.

However, it has been proven, tried-and-tested by many individuals and households that peace of mind, courage, hope, and peace in the family can be the catalyst for adequate income, financial liquidity, success, and happiness.

Key imperatives during the COVID-19 pandemic

Keeping people safe and healthy.

Research has shown that, insofar as families might anticipate out-of-pocket costs for COVID-19 testing or treatment, cash-flow dynamics could influence families’ decisions to promptly seek healthcare services.

Ensuring access to adequate income to meet basic needs.

With many businesses operating on reduced hours or closed entirely, and workers increasingly sheltering in their homes or unable to go to work, many workers will face reductions in labor demand and earnings. Institute research has documented that families experience significant income volatility, and that the lion’s share of this volatility stems from within jobs, as opposed to transitions between jobs, with low-income families most susceptible to downside risk.

Understanding the distinctive risks to small businesses.

Volatility impacts small businesses as well. As COVID-19 spreads, revenue volatility could cause more small businesses to shut down, particularly those with more limited cash liquidity and those in minority neighborhoods. The Institute’s research has shown that across the board, small businesses have volatile, irregular, and potentially unpredictable cash flows, (21 percent of firms across the 25 cities we studied). This is true especially for newer businesses. They also tend to operate with a limited cash buffer—typically enough to cover two to three weeks of outflows—and firms with limited cash liquidity are less likely to survive and grow. We have shown that among small businesses with irregular cash flows, 46 percent exit the small business sector within the first four years.

Boosting liquidity for households and small businesses.

What really makes families and businesses more financially resilient in the face of volatility is having a liquid cash buffer. In general, we estimate that families need roughly six weeks of take-home income in savings to weather a simultaneous income dip and expenditure spike. Overall, 65 percent of families lack a sufficient cash buffer to weather this event. Families with larger cash buffers are more resilient in the face of income volatility: they cut their everyday spending less when they experience a drop in earnings or lose their job entirely. They are less likely to default on their mortgage after a negative income shock. They also increase their expenditures less when they receive a major cash infusion, like a tax refund. Businesses with a larger cash buffer are less likely to close down. Therefore, it is imperative to find ways to quickly get cash into the hands of those families and businesses most affected.

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