What the global stock market crash means for you

The stock market crash can seem like the kind of thing that bothers money managers in London, staring at endless screens of red numbers, but is utterly divorced from the lives of the rest of us. We're far more likely to be worrying about the effects of wet weather on our summer holiday than the impact of a global panic about growth in China.

But you shouldn't dismiss this entirely, because it will hit all of us

'Black Monday' saw stocks drop around the world on a fairly epic scale. The FTSE 100 plunged below 6,000 for the first time since January - after topping 7,000 earlier this year. This fall of almost a fifth of its value echoes precipitous falls everywhere from the US to emerging markets and Europe.

Investors

The most obvious impact will be felt by those with stocks and shares ISAs, or other share-based investments, who will have seen the value of their investments tumble.

However, the experts are advising anyone facing severe losses not to panic. Nick Dixon, Investment Director at Aegon UK, said: "Stock markets are in for a bumpy ride over the coming weeks, but if savers can stomach the ups and downs, equities are likely to provide superior returns over the medium and long term. With a FTSE-100 dividend yield of circa 4%, equities should deliver good value for savers with a five year plus investment horizon. Undoubtedly, there will be volatility along the way, but this shouldn't faze individuals with a long term investment strategy."
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Pensions
If you have any kind of defined contribution pension - either a workplace pension or a private one - then your investments are also highly likely to contain some shares. Again these will have suffered major drops, but again the experts say it's important not to panic.

As long as you have a reasonable period to retirement, there is a good chance your investments will recover. If you are nearing retirement, it's worth checking what you have lost, as many schemes will automatically switch you into less risky investments as you approach retirement age.

Mortgages

There could actually be a sliver of good news for those with variable mortgages. While the market was booming and GDP appeared to be recovering, there was a great deal of talk about a possible interest rate rise - which could have made your mortgage more expensive. Now, that rise is expected to come as late as next autumn.

The other effect this has on people with mortgages is that when the risk of a rate rise falls, the cost of a fixed deal often falls too, so we can expect some new cheap five year fixes to hit the market.

Spending

There's more good news here. The slowdown in China that precipitated the crash will mean China continues to consume less commodities. It means the price of these commodities will remain depressed, so the price of everything else that uses them will remain low. We can expect everything from filling up the car to the supermarket shopping to stay cheaper for a while to come.

In addition, China has tried to boost its economy by devaluing its currency - which makes all its exports cheaper. It means anything made in China is going to get cheaper too.

Economy

There are a number of forces at work here, so we cannot be certain exactly what will happen. On the plus side cheaper imports and cheaper commodities prices may boost spending, which will increase retail sales, and the high street will remain busy.

On the negative side, many British companies rely on exports to the rest of the world - including the Chinese market. A slowdown in China, or anywhere else for that matter, will mean a slowdown in exports. This will affect businesses, who may be forced to shed jobs. It will also mean our record current-account deficit gets even worse, leaving us with less money to spend at home.

How these forces balance out against one another and what it eventually means for businesses and jobs remains to be seen, but George Osborne has warned that "I would take it as a reminder that we are not immune from what happens in the world."

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