CREDIT crunch - sounds unpleasant, but will it make any difference?

Even if you don't stash your cash in troubled investment bank Bear Sterns, have a Northern Rock mortgage or a pension invested heavily in the stock market, the chances are you will still be affected.

The UK regularly imports things from America, including financial difficulties, so if banks are struggling there because of a lack of confidence in the market, soon enough things might not be so rosy here.

Confidence is a tricky thing to legislate for - the more the government tells people not to panic, the more people begin to think there is something to worry about.

We also have home grown financial problems - Northern Rock being an obvious example.

Decent mortgage rates are hard to come by as nervous banks and building societies would rather hang on to their money than lend it.

This difficulty getting mortgages could contribute to a slowing housing market and if house prices don't rise or even begin to fall, home owners feel less well off and reign in their spending.

Dr Clare Chambers from the business school at Bournemouth University said: "A credit crunch means it is more difficult to get credit. People are going to have fewer pounds in their pocket, shopping is going to get more expensive and budgets are going to be tighter.

"I don't think this is going to be as bad as the 1980s, but it could be and we have to be prepared for hard times."

She explained that when consumer confidence falls, it can have a self-reinforcing cyclical effect.

She said: "Everything links back to the USA and because it is an important year politically there things could still stabilise."

Nigel Snell, communications director of Poole-based friendly society LV, said: "Clearly this is a worrying time for consumers, particularly for people holding stock market investments, and the markets are likely to remain volatile for quite some time.

"However, at LV we take a long-term view of equity investments and still maintain that stocks and shares should generally perform well, if held over the long-term.

"Regarding house prices, many pundits believe the market is falling, but the previous gains have been huge and we believe there is still a lot to be said for the old adage of investing in bricks and mortar'."