- How the credit crunch affects you
- The credit crunch what went wrong
- What needs to be done next?
- Investments
- Saving facts
- Loans

The government's action to bail out UK's major high street banks by effectively nationalising them, protects UK depositors. All UK savers have been assured that their savings are safe - not just the first ₤50,000 but all of it. So there is no need to start keeping your life savings under the mattress!

The government was also quick to act in guaranteeing the savings of UK investors in failed Icelandic bank Icesave. Most savers in overseas banks are covered to some degree by the Financial Services Compensation Scheme (FSCS) but the UK government has agreed to guarantee the remainder.

What can you read from all of this? Simply that Western governments are not prepared for investors to lose confidence in the banking system - and will do all that is required to bolster the banks and calm the stockmarket.

But as Andy Merricks, IFA with Skerritt Consultants of Brighton explains, savers still need to be vigilant.

UK savers are a lot safer than they were but you still need to be aware of those banks and smaller building societies that have not taken part in the bank bail out. It is not about rate chasing now - in fact the one’s that were offering the best rates, the likes of Isave and Northern Rock are the one’s that had the most problems.

He adds: If you are with a bank that is not one of the big high street names, your first ₤50,000 is safe and that accounts for a large percentage of the population. Those with more than ₤50,000 should look to spread their assets. In fact diversification in this way is a good lesson to learn for everyone.

Investments

Savings on deposit are one thing but what about investments? Unfortunately governments can offer no guarantees for those of us with money in stocks and shares or unit trust funds.

Andy Merricks IFA with Skerritt Consultants explains, the sensible options.

There is an argument for holding on to your investments and wait for the markets to improve – rather than crystallising a loss now by selling. I agree to a point but I don’t go along with the idea of holding on for the sake of it as not all stocks will improve. Investors held onto stocks when the tech bubble burst in 2000 and ended up losing a lot more. You have to discriminate to some degree and offload where necessary. The maxim I use is ‘if you wouldn’t buy today, you shouldn’t still be holding it.

As for investment funds, Merricks believes investors should look to diversify where possible. Try and keep your investments balanced – certainly 100% in equities now is not ideal. Possibly look at bond funds and global funds rather than just UK focussed. For longer term investors, equity and income markets will do better than cash in a low interest environment.