The effect of inflation on your savings
What is inflation?
Inflation is when your money decreases in value over time. As I’m sure you know, things are more expensive than they used to be.
Take beer, for example - 1 pint in 1970 would cost you around 13p. Now, you’re looking at £3.50 a pint which could have bought you 27 pints back in 1970!
Because of inflation, you can buy far less now than you could with the same amount of money previously. Imagine what this could do to your savings over the years (we’re talking about losing thousands in purchasing power).
The current rate of inflation
You don’t need to worry about how inflation is measured, but it is important to know the current rate so you’re aware of how it affects your savings and investments. It currently sits at 9.1%, and prices have increased at their fastest rate in 40 years.
Food prices, energy bills, fuel; the cost-of-living crisis continues. What could be worse? Standing still and doing nothing about it.
Keeping a closer eye on your everyday finances is a must; ensuring you are spending less and saving (where possible). But also reviewing where you keep your savings is important so you can attempt to keep up with the current rate of inflation.
Can I beat inflation?
Where most people feel like keeping their money sitting in the bank is safe, it could be more damaging than taking the risk of investing. For short-term goals where you plan on spending your money in the next few years, leaving your money in a savings account might be the sensible option. But for long-term goals like saving for retirement, you may want to consider exploring options that can offer you a greater return on investment so that you can sustain your purchasing power.
Consider where you keep your savings and what return you are getting (if any). Could inflation be eating away at your savings? Taking a more proactive approach to managing your finances won’t just help you feel more in control but will make your money go further in the long run.
For guidance on investing, please don’t hesitate to get in touch – 01633 987070.
