How the Russia-Ukraine conflict could affect young people’s finances
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The Russian invasion of UkraineGlobal stock markets have been shaken. This has also caused concern about personal finances. Many people around the globe have already felt the pinch from rising prices in the aftermath of the coronavirus epidemic.
The pandemic’s economic impact was felt most strongly by young people around the world. It is estimated that there are approximately 500,000 people affected by the pandemic. surveyThe Organisation for Economic Cooperation and Development published a July report that found more than one third of those aged between 18 and 29 in 25 countries had reported financial problems since the outbreak of the pandemic. This is more than any age.
A Russia-Ukraine crisis could have devastating economic and financial consequences that can threaten the tentative global recovery.
Below are financial experts’ opinions on the biggest financial issues young people may face in this crisis and their advice for how to safeguard your money.
Manage fuel costs
The Russia-Ukraine crises has also pushed oil prices higher, with concerns about disruption of energy supply. Brent crude futures hit $105 a barrel on Sunday eveningOn Thursday, the stock had surpassed $100 for only the second time since 2014. An analyst even estimated that the oil price could hit $130One barrel.
Oil and other energy commodities such as oil were already on the rise before the increase in geopolitical tensions. This led to higher fuel prices. The price of a gallon in gasoline in America was $3.610 Monday according to Bloomberg. AAAThe national average was $2.717, an increase from last year’s figure of $2.717.
Sarah Coles from Hargreaves Lansdown, personal financial analyst, suggests that you can reduce your car’s fuel consumption by using public transportation more. It is important to ensure your vehicle’s regular maintenance and proper inflation. It could even be possible to remove excess weight, such as boxes or roof bars, and take large loads out of the trunk.
She added that driving styles also make a difference: driving slower, using the most appropriate gear, and slowing down more.
After the Thursday attack, natural gas futures rose by 3.5%. According to the Directorate-General for Energy of the European Union, the EU is the biggest importer of natural gases in the world. The largest portion of the gas comes from Russia (41%)
Coles stated that it is worth investing in insulation in your home to reduce heating bills in the long-term, if you have the money. “Otherwise, there are still steps you can take — like turning the thermostat down by one degree, switching radiators off in rooms that aren’t used regularly, being more ruthless about how often you run the dishwasher and washing machine, or installing DIY draught-proofing.”
She also stated that higher energy prices would likely increase the cost of “every stage in food processing, and transport.”
Coles stated that the conflict may also lead to fewer exports of food, which can also increase prices. Coles pointed out Russia and Ukraine as the source of 29%, 19% and 80% respectively of world wheat exports.
CNBC spoke with Alan Holland, founder and CEO of Keelvar, a sourcing technology company. Ukraine is considered the “bread basket of Europe”He warned of the possibility that conflicts could cause food supply chains to be “hit hard”
Paul Dales (UK chief economist, Capital Economics) told CNBC by email that the increase in world agricultural prices in recent months suggests that U.K. food inflation may soon climb from 4.3% in January, to 6.0% in December.
But he pointed out, too that prices of agricultural commodities worldwide haven’t changed much since Russia invaded Ukraine.
Dales said that grocery stores in Britain have been more willing to accept large price hikes into their margins than lose customers. He said that while food inflation could rise further, it appears unlikely that it would really soar.
Do not’switch to ditch’ your stocks
CNBC received an email from Coles at Hargreaves Lansdown stating that Russia’s invasion into Ukraine had caused “fairly dramatic market volatility.” Coles suggested that investors look past these incidents and concentrate on long-term goals.
She stated that “daily market movements are worrying, but it’s not the right time to swap and ditch stocks as this could lead to capitalising losses and over-trading.”
Coles said that the best thing for young investors is to diversify their portfolios with exposure to various geographies as well as an appropriate mix of asset classes to suit your investment objectives and age.
Becky O’Connor is the head of savings and pensions at Interactive Investor in U.K., and she also acknowledged concerns over slow and volatile investments that could discourage some from saving. CNBC received an email from her stating that they have a better chance to make something if their money is left in the market for at least a few years.
Coles advised that while people might be tempted by the idea of cutting down on their contributions to their pension fund in an effort to save money, she strongly discouraged this.
Her explanation was that investors can gain more if markets rebound by paying in more regularly to their pension.
Do not rely upon higher interest rates
Investors have been concerned that higher oil prices may cause inflation to rise more widely. readjust their expectations for Federal Reserve interest rate hikes.
Elliot Hentov is the head of macro policy research for State Street Global Advisors. He stated that the U.S. hike cycle cannot be stopped. He believes it can be slow down and flattened. The Fed may take “a bit longer” to raise rates.
Hentov stated that European central banks had likely “changed their course” and were planning to raise rates. This is because they are more vulnerable to “stagflation,” which could be a result of the ongoing conflict. Stagflation can be described as a combination slowing down in economic growth with rising inflation.
O’Connor predicted that inflation and interest rates would rise even further in the short term, which will act as a double whammy on increasing borrowing and living expenses.
“In terms savings, interest rate hikes may be a positive thing, but they don’t feed through nicely to savings accounts,” she stated, explaining that interest rates for cash savings accounts still were “way behind” inflation. It’s shocking to see how little value is being held in savings.
—This report was contributed by Cat Clifford and Yun Li of CNBC.
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