Worried about the future, but is it pointless?

Kai123

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Hey,

I recently got a great job last year, and currently on a strict budget. With overtime I am flat out in work and I can save 1k a month.

I've 4k sat in the current account since I've been toying with the idea of opening a Sterling Account and try and keep a few thousand in Sterling (I might move to the UK in a year or two, and I've no faith in the Euro).

My main concern is the collapse of the Euro. I will have (hopefully) 24k in savings in two years, but there are plenty of political events happening over this period. I have family in the UK so I can always move home if it gets to bad here, and I've no idea if my 24k will mean anything if rents and house prices keep increasing, I might just move to the UK but at which point the Euro might be dead, or the pound much more stronger against it.

The only real assurance I have is to not worry if the Euro dies, the new Punt will be pegged to Sterling regardless of what happens. If anyone can clarify on that then I can at least stop worrying too much about the future and my modest pot of savings.

Regards,

Kai.
 
So you want us to have a crystal ball :rolleyes:

My advice, save in Euro and take the costs of currency fluctuations out of the equation.
 
First of all, kudos on the work ethic and savings habit. These habits/traits are a strong predictor that you will find financial independance and security in short order. No political event can take these innate assets away from you. Even in the financial worst-case-scenario, you've got the skills to rebuild.

Given your relatively small exposure to currency risk, defending against the possibility of a Euro collapse literally isn't worth your time.

At this point I genuinely think that stress may be the biggest risk factor in your life today. Take a couple of hours off tomorrow and walk around a park.

You might find this perspective interesting. http://www.mrmoneymustache.com/2011/10/17/its-all-about-the-safety-margin/
 
First of all you need to stop listening to the talking heads because their primary is to promote themselves and collect fees from their books, speaking opportunities etc...

Next you need to get some perspective on the Euro. Fact: the Euro is the currency of a major economic block, Fact: over the past few years these countries have shown themselves will to do whatever is necessary to defend their currency. Fact: Germany benefits big time from being able to trade in an under valued currency. Fact: Despite what you hear in the press, the majority of voters voted for a more integrated Europe at the last elections. Fact: The Swiss National Bank (SNB), Switzerland's central bank, holds Euro bonds equal to the deficit of the 7 seven biggest Euro group countries. Fact: During the recent Greek crisis the SNB conducted market operations in defence of the Euro. Of course no one knows what will happen in the long term, but within your time frame there is almost no chance of the Euro disappearing - there is too much vested in it for that to happen.

On the other hand, if we look at the UK there is a lot of uncertainty there. First of all in real terms the purchasing power of sterling has gone down of the past several years, look at the difficulties that people on a fixed income are faced with. Next there is the whole issue of a EU exit. If that does happen then at a minimum you can expect to see the City being hit badly as banks move off to Frankfurt and Dublin. The idea that British industry will do well outside the EU is doubtful, they have not faired particularly well with free access to the markets, so it is hard to see how they will do better when the barrier go up on a major trading block. If it does go pear shaped, then bank of England does not have anything like the resources of the Euro Group plus Switzerland to defend the pound.

Over the period you are talking about you are probably better to continue saving in Euro rather than exposing yourself to a very real FX risk for the sake of covering a very small perceived risk.
 
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