Voters in Britain singlehandedly ignited an international crisis with their historic decision to leave the European Union last week.
The British exit, or “Brexit” for short, continues to dominate the news, spawning talk of regret, a re-vote and recovery from what The New York Times described as a massive Brexit “hangover.”
It’s easy to think the June 23rd vote won’t have an impact on family finances over on this side of the pond, but experts say it already has. We’ve pulled together three ways in which the vote hit your wallet and what you need to know in each case.
Cheaper Travel. It doesn’t feel great to mention this when Britain is still reeling from the historic vote, but for anyone planning a vacation to Britain in the near term, your cash will go further. As of this morning, the exchange rate had $1.32 (USD) equaling one British pound, representing a 30-year low. If you have existing plans to travel to Britain, exchange some of your currency now, says Mike Stitt, the North American president of Travelzoo, to take advantage of the post-vote slump. Stitt also advised prospective U.S. travelers to look for special deals since the industry response in times of crisis is to entice travel.
Depressed 401k. Immediately following the Brexit vote, the S&P 500 index had its worst opening since 1986. These globally fueled losses affect everyone’s stock portfolio in some way. The main advice here is to stay put. If anything, use this time to review if you are making the most of any employer matching and consider increasing your contributions. Fidelity research from the 2008 crash found that investors who stayed the course and continued contributions in workplace savings saw a “29.3% leap in their average account balances for the 18 months through March 2010 thanks to market gains, contributions and other plan activity. Meanwhile, plan participants who stopped contributing in late 2008 or early 2009 experienced an average gain of just 15.3% on average.” Traditional deposit accounts will be less effective due to continued low interest rates, but finding the highest savings account yield is possible if you shop around. Our bank rates are monitored and updated.
Lower Mortgage Rates. The average 30-year, fixed-rate mortgage stands at about 3.7 percent as of this writing and may go lower. And any talk of a July interest rate hike when the Federal Open Market Committee next meets is widely considered “off the table” given the sheer level of global economic uncertainty. This may prompt those sitting on the fence in the buying or refinancing markets to finally pull the trigger. But no matter market conditions, the fundamentals of smart homeownership still apply. Don’t buy what you can’t afford, which goes beyond the monthly cost of your mortgage. Consider taxes, homeowner association fees and above all, more than you think for upkeep and emergency repairs.
What’s your take on Brexit? How are you responding when it comes to your finances?
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