Brexit: What Does It Mean And How Does It Affect Me?
BOSTON (CBS) – Britain has voted to leave the European Union.
"Brexit," short for "British exit," is a big deal around the world, but how does it affect you here in the United States?
"This caught a lot of people by surprise," CBS News Business Analyst Jill Schlesinger told WBZ NewsRadio 1030 Friday. "We are talking about a small country, but it is the fifth largest economy in the world."
ECONOMY
The global economy is so complex and inter-connected that when something happens in Britain, it's bound to impact us here.
And that includes the great amount of uncertainty surrounding this decision.
As a result, the U.S. stock market is sharply lower, which means your investments and 401Ks are losing value – at least on paper.
Economists believe Brexit will cut into economic growth throughout Europe and could even dent growth here in the U.S.
Schlesinger says there's no reason to panic, but you should pay attention.
"What we're really looking at now is what will this crisis really roll out to. Will it be sort of like a dud, like 'Hey, it's Y2K all over again!' 5 ATMs didn't work. Or is it something bigger, like 'Wow, Lehman Brothers collapsed and that led to something bigger," she told WBZ.
"I don't think this is a Lehman Brothers event, but you know what, we don't understand yet what the implications are."
FINANCIAL ADVICE
While Wall Street convulses, what does Brexit mean for all of us on Main Street? We asked a financial expert for advice. "Most people are worried about the economy. They're worried about jobs right now, and these shocks don't make us feel better," says David Caruso of the Coastal Capital Group in Danvers. A lot of people are more than nervous. "This has long term ramifications because it could slow down the worldwide economy. It is going to create currency disorders," he says.
World markets hit the skids after the Brexit news. Caruso says most people should hold firm, that is, if they have a diversified plan. He says, think of your money held in 3 buckets. "With these buckets it's short term, intermediate term, and long term," he says. Short and intermediate term covers money you'll need in the next year to 5 years. "That should be in the money market, even though they're not paying much, and that should be in the CDs, because you need that money," Caruso says. "It's only your long term money that should be in stocks. "If you're investing in stocks and it's less than a 5 year time frame, it's probably not a smart thing to do," he warns.
Caruso says today should be a wakeup call for everyone to check whether their money is in the right buckets. But there are also other major forces at play. Trade will be affected, US exports could be hurt, and if Americans are frightened and spend less, the economy and jobs will suffer. "So if we do slow down and there is a recession, it's going to make it more difficult," Caruso says. But it's not all bad. Interest rates will probably stay low. That's good news for house hunters and loan shoppers. "There is going to continue to be more volatility than there has been in the past, and that's the new order we're living under," according to Caruso.
Another key point- this is not a one day mess. England's exit from the European Union will take a couple of years and other countries may also decide to bail out. With an interconnected world, we're all going to feel it. So for those of us on Main St. advisors say it's import to save, and diversify.
SCAMS
Massachusetts Secretary of State Bill Galvin says unexpected events, like the British vote, are opportunities for scammers to take advantage of people's fears.
"We're particularly concerned about some of our elderly investors and people who might be panicked about what it means for them and their financial savings," he told WBZ Friday.
"Days like today, if people call you offering gold bullion or other things like that, it's particularly dangerous," Galvin said. "If you get unsolicited calls, people call looking for information, people call looking to check on your accounts, pretending to be financial service people, just do not respond."
POLITICS
The British vote also has similarities to the presidential race, according to Anthony Mason, the Senior Correspondent for business and economics at CBS News.
"I think people in this country, campaigns in this country, have to look at what happened there, because the list of grievances for the 'leave' voters is very similar to the list of grievances for, say, Donald Trump voters," Mason said on CBS This Morning.
Read: Keller: What Brexit Could Mean For Presidential Race
"They're concerned about immigration, they feel like economically they've been left behind. The banks who all said, 'Stay in, stay in,' they feel like the banks have done fine after the recession, but they haven't, so there's a very similar list of grievances and those are the voters who turned out in England, in very strong numbers."
EXCHANGE RATE
There is some good news, from an American perspective of course.
The British pound hit a 31-year low Friday.
That means if you're planning a trip to Britain this summer, the exchange rate between the pound and the dollar is great and you can get more bang for your buck.
Overall, the best way to look at Brexit for now?
"We'll have to wait and see," said Schlesinger.
WBZ NewsRadio 1030's Joe Mathieu and WBZ-TV's Ken Tucci contributed to this report.
