Last fall, China's state-run media alerted citizens to profits that could be made in purchasing inexpensive stocks. Stock market gains reached 150 percent in a year, yet the volatile Chinese economy wasn't growing.
Investors panicked; millions of people realized their stocks weren't worth borrowed money they used to invest and immediately started selling. Were it any other country, this catastrophe may not have had a global impact, but China maintains the second-largest economy in the world next to United States.
Numerous U.S. businesses survive by conducting business with China, and the Chinese government owns $1.27 trillion in U.S. government bonds, meaning failures in Shanghai will always be linked to those on Wall Street.
When Chinese stocks fell 8.5 percent - about 1,500 points in comparison to the Dow Jones - on Monday, it created a ripple effect of steep declines in European and Asian stock markets. By the New York Stock Exchange's opening bell rang in the morning, U.S. figures were already in a tailspin.
This isn't solely a problem for hedge fund managers and stock brokers. Every American is affected. Ramification - whether good or bad - may not occur immediately, but the will happen. Here are three reasons why Monday's market trash should matter to you.
Gas prices
Oil plunged to a six-year low over concerns that China would demand less. This, coupled with a growing crude-oil supply in the U.S. could signify lower gasoline prices.
Brazil and Russia are among oil producers hardest hit by the Chinese market, especially after many expected to rebound from plummeting figures at the end of 2014. Americans, however, continued manufacturing despite the worrisome market conditions, even keeping supplies high despite low global prices.
A high supply combined with low demand may lead to the U.S. nation gas average, which sits at $2.59, to drop further.
Interest rates
Every penny borrowed, whether it be for a home mortgage or credit card, is impacted by the market. As Entrepreneur's Ray Hennessey put it, interest rates on your loans may be on the way up.
"It's this flexibility that banks have in setting rates that is directly affected by the market's fall," Hennessey writes. "Your ability to pay, as assessed by the bank, is based partially on your past performance but also your market conditions. Falling market create uncertainty. Uncertainty increases risk. Risk raises what you're charged for interest."
The Federal Government was already considering raising interest rates based on an improved U.S. economy and low unemployment rate. This all depend on how Monday's crash shakes out, and whether Americans will feel an impact.
The Fed's job isn't to worry about stock and bonds, but they also have to consider how the prospect of growth could be affected if the global market doesn't balance out. They have until Sept. 16, the date of the next policy meeting, to make a decision.
401k's
The general consensus is that there is no need to panic. The market continually fluctuates, and just because investors are seeing red doesn't mean it's time to sell. MarketWatch's 401k chart guides investors as to what they train of thought should be, depending on their varying investment needs and goals.
While they ask questions like "are you consistently contributing to your retirement?," other factors to consider are tax implications of selling. One must consider their risk tolerance and whether pulling out is worth a financial windfall.
Finally, one must think about personal needs, how long to invest, and how must needs to stay liquid.