What to do with your finances post Brexit

Oct 26, 2016 | Tony Byrne's View

In the leeu-1473958_960_720ad up to the EU referendum there were lots of scare stories about how potentially leaving the EU would damage our economy and hit our personal finances hard.

So now we know the result, what has actually happened?

Well, the pound has fallen to a 31-year low which is bad news if you are planning a holiday anytime soon and you want to purchase US dollars or Euros.

The central bank interest rate has been cut to a record low of 0.25% which has resulted in many banks reducing their own interest rates on savings accounts. The popular Santander 123 account has had an interest rate cut of 50%!

With the pound falling it will mean businesses will have to pay more to import their materials and services. This will likely result in higher prices in the shops and a good chance prices will rise higher and faster than any interest you can earn on cash savings.

So how can you protect against this?

Well the good news is that stock market indices such as the FTSE 100 have come very close to hitting their record high. This is mainly down to the falling pound. The majority of the biggest UK companies receive their earnings from abroad and therefore when they come to convert this money back into pounds they are getting more for their money, resulting in higher profits.

For money you plan to hold for the long term now is the time to consider investing in ‘real’ assets such as equities (shares) and property, as historically these types of assets have kept pace with inflation and even beaten it. Yes, it is riskier but as long as you diversify and choose a strategy that fits with your attitude to risk you should hopefully see higher returns in the long run. You will also find that providing you have the right strategy in place, the level of Financial Services Compensation Scheme (FSCS) protection is higher than that offered by banks. You are only protected up to £75,000 with one bank if it goes bust. Whereas if you held 10 different quality low cost investment funds inside your ISA for example, you could receive £50,000 protection per fund meaning total protection of £500,000!

You can download our guide ‘The Fundamentals of Investing’ from our website here: https://wealthandtax.co.uk/financial-planning/managing-your-money/

Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.

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