To quote Rudyard Kipling, “If you can keep your head when all about you are losing theirs…”
There are some interesting things to bear in mind when contemplating the future. By its very nature, this referendum has been all about uncertainty. It is an unprecedented event in our history and it is not possible to make concrete predictions about what could happen to our collective finances in the long-term.
It is also interesting to note that while 75 per cent of 18 – 25 year olds voted to remain, that number fell to 56 per cent for 25 – 40 year olds – it’s fair to say these are young people too. That is a much larger group of young people (spanning 15 years as opposed to seven) who are experiencing many of the economic problems I’ve been writing about for the past five years…and they are much more divided on the issue than has been conveyed.
There are a few things to mention that could be a source of comfort. Savings are protected by the government up to the value of £75,000 and banks have been obliged to reinforce their liquidity buffer, so the prospect of you losing your hard-won house deposit is unlikely.
There has been premature talk of savings and pensions seeing their value “wiped” by stock market vacillations today. These losses are not material unless we sell out so we must sit tight and wait to see what markets do in the coming weeks and months.
Being financially savvy is a long game. It’s about being prepared to ride out the turbulent times (which have come before and will come again), not taking undue risks, diversifying your investments…and hunkering down when it comes to spending.
We may have to draw up a budget in case there is inflation in the basket of everyday goods we buy. For many young people, this will be the first time they have ever done this.
It may seem alien (or unfair) but it is simply the time-honoured tradition of belt tightening – it happens during periods of economic uncertainty and it is not necessarily A Bad Thing.
It’s about deciding what’s really worth spending money on. It could prove to be a very useful exercise and may give you some feeling of personal control. When young people express dismay and even heartbreak over today’s result, positive personal action to take care of one’s own situation is as good a response as any.
When it comes to housing costs, I find this to be a compelling (maybe heartening analysis) from renowned property expert Kate Faulkner:
If buyers back off, demand falls and, if this goes below supply levels – ie the number of properties available – then sellers panic and bring their prices down. This is likely to happen over the coming weeks and if it does, some areas, especially those in the Midlands and north of the area, then price rises will stall and in some areas we will potentially start seeing reports of prices falling.
When reports start hitting the headlines that the property market may fall, even more buyers hold off, so prices can spiral downwards until they become such good value and/or the economy starts to pick up again and confidence returns. This results in more buyers than sellers, so prices start to be reported to be rising and the market comes back to life.
This is the housing market cycle in action. Will young people potentially be the beneficiaries of a housing correction? Maybe – only time will tell. It could be a bit of a wild and bumpy ride and we have to see whether it presents opportunities for the young, many of whom have been priced out of housing over the last decade.
To be clear, this is clearly a very painful time for anyone whose job is on the line (and their close family and friends). For anyone who is not directly affected in the same way, a good course of action is to reserve judgement about what the outcome of this referendum will be and, when it comes to our finances, keep a cool head.
Never has it been more important to scrutinise your outgoings, stay firmly within your budget and start a savings action plan so you can build personal financial resilience against whatever Brexit throws at you.
But most importantly…
Keep calm and carry on.
Iona will be appearing on ITV: Tonight next Friday evening as one of four experts discussing how Brexit will affect your finances. Tune in at 7.30. In the meantime, you can learn how to have a healthy relationship with money (regardless of the economic climate) by reading Spare Change, which you can buy here.