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In an increasingly uncertain world, safeguarding your personal finances is paramount. Threats to financial security are emerging from multiple fronts. Concerns over international tensions and domestic issues are understandable, prompting the need to secure your assets and protect against unforeseen challenges.
Securing Your Finances: An Essential Checklist
Experts share a crucial checklist to fortify your finances against escalating threats, focusing on practical steps for financial preparedness and resilience.
Enhance Banking Security
Establish a Secondary Bank Account
With banking system glitches on the rise—158 incidents were reported between January 2023 and February of the following year—having a backup account is crucial. Barclays experienced an IT disruption in January, impeding payments for three days. Keeping emergency funds in a separate account ensures continuous access to your money during unforeseen circumstances.
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Consider app-based banks such as Monzo and Starling, which offer rapid account setup through a smartphone and simple identity verification.
Maintain Physical Cash Reserves
While diversifying bank accounts offers protection, consider scenarios where multiple institutions face disruptions. The Treasury Committee has underscored the “value of physical cash in emergency preparedness,” particularly during cyberattacks or system failures.
While hoarding isn’t advised, having a modest amount of cash—such as £50 in your wallet or £100 at home—can be useful in emergencies.
Optimize Savings and Investments
Invest in Fixed-Term Savings Accounts
With ongoing concerns that inflation could remain elevated amidst geopolitical uncertainty and trade measures, shielding savings becomes vital. Keeping funds in easy-access savings accounts may not provide sufficient protection against inflation’s erosive effects.
Easy-access savings rates have declined recently, making fixed-rate accounts an appealing alternative. For instance, Castle Trust Bank offers a competitive rate for its one-year cash ISA. Locking in a fixed rate safeguards your money against potential rate decreases.
- Castle Trust Bank: Offers a competitive rate on its one-year cash ISA fix.
- Hodge Bank: Provides attractive fixed-rates for three- and five-year accounts.
Ensure that funds locked into fixed-term accounts aren’t needed for immediate use, as early withdrawals might not be possible.
Build an Emergency Fund
An emergency fund is crucial for handling unexpected expenses or potential income disruptions. Aim for three to six months’ worth of essential living expenses in an easily accessible savings account.
Ian Cook, a chartered financial planner at Quilter Cheviot, emphasizes the importance of an emergency fund for addressing short-term financial setbacks, such as unexpected repair costs.
Consider Cybersecurity Stocks
As cyberattacks gain prominence, investing in cybersecurity stocks could prove lucrative. The increasing frequency of high-profile cyber incidents highlights the growing importance of cybersecurity measures.
Darius McDermott, managing director of Fund Calibre, suggests that cybersecurity is a critical element of national security and economic stability, presenting unique investment opportunities.
- ISE Cyber Security UCITS Index: Tracks the performance of leading cybersecurity companies.
- Allianz Global Technology Trust: A top tech fund with holdings in major cybersecurity firms.
- Specialist ETFs: Offer targeted exposure to the cybersecurity sector.
Diversify Your Investment Portfolio
Amidst significant geopolitical uncertainties impacting markets, diversification is key. Spreading investments across different sectors, geographies, and asset classes mitigates risk exposure. Ideally, portfolio components should react differently to market conditions.
Dan Coatsworth, an investment analyst at AJ Bell, recommends diversifying investments to reduce risk, ensuring a smoother investment journey by balancing potential losses with gains in other areas.
Cybersecurity Measures for Financial Protection
Secure Banking Apps on Your Phone
Protecting your smartphone—where financial apps reside—is critical. Enable robust security features, such as PIN codes or facial recognition, to safeguard banking apps. Use different PINs for your phone and apps to prevent unauthorized access.
Enable stolen device protection features on both iPhones and Android devices, preventing criminals from altering settings and allowing you time to secure your account from another device.
Enable Two-Factor Authentication
Cybersecurity experts recommend enabling two-factor authentication (2FA) on critical applications like banking and email. This security measure adds an extra layer of protection, requiring two forms of verification for account access.
The UK’s National Cyber Security Centre emphasizes that 2FA significantly enhances online account security, keeping hackers at bay even if they obtain passwords.
Employ Unique Passwords for Each Account
Using strong, unique passwords for each account is essential. Password reuse can expose multiple accounts if one is compromised.
Marijus Briedis, chief technology officer at Nord Security, advises against reusing passwords across different accounts, emphasizing that a single breach can make all accounts vulnerable.
Consider using password managers or securely storing written passwords. The primary threat isn’t physical theft, but rather online breaches.
Beware of Scams and Fraud
Exercise Caution with Unsolicited Contact
Scammers exploit fears related to global instability and fraud. Remain vigilant and avoid falling prey to scams while attempting to protect your finances. Treat unsolicited emails and phone calls with skepticism, and avoid clicking on unknown links.
Hackers can spoof phone numbers to mimic legitimate institutions. Verify the identity of anyone claiming to be from your bank through trusted channels. Some banks now provide app features to confirm the authenticity of incoming calls from their team.
Ian Cook cautions against “safe haven” investment offers during times of global tension, advising skepticism towards unexpected contact and promises that seem too good to be true.
Address Currency Risk
Consider currency risk when holding international investments. A strong dollar may have previously benefited investors, but recent declines against other currencies highlight the need to hedge currency exposure.
Jason Hollands, managing director of Evelyn Partners, emphasizes that currency risk is often overlooked, and advises investors to mitigate risk by hedging US holdings back to pounds.
Funds with ‘h’ or ‘hedged’ in their name indicate currency hedging. For example, the iShares Core S&P 500 UCITS ETF Hedged GBP tracks the S&P 500 while hedging currency exposure back into British pounds.