The topic of inflation is all over the news these days, but do you truly understand the impact it can have on your savings? Do you have a plan to counteract the effects of inflation? If you don’t, you could end up regretting it in the long run. Here’s why inaction can actually cost you money and ways to protect your savings from the damages of inflation.
This does not constitute advice and advice should be sought in all instances before acting on it.
The impact of inaction
If you have a diverse portfolio, you’ll realise that inflation is battering your savings. Most saving accounts are already low-interest and when stacked against inflation, your money is quickly losing its purchasing power. So while it’s still important to keep some cash on hand and in savings, there are other options to protect your money.
Ways to protect your savings
Establish your emergency fund
In general, your emergency fund should be enough money to cover your essential living expenses for at least three months, but ideally six. Failing that, you should aim to have as much saved as you possibly can. If you don’t already have a monthly budget for you to easily check how much you’ll need, work out the total of things like energy bills, mortgage payments or rent, travel, and food costs. This will tell you exactly how much you’ll need to save, but because inflation is so high at the moment, be sure to save any extra just in case your expenses go up.
Search for the best savings interest rate
It is important to have a savings account, so the best thing you can do is to find one with the highest rate available. There are always offers for better rate ISAs and tonnes of opportunities to switch to an account that will allow your money to grow at a faster rate. Keep in mind that offers are usually limited to the first year or have a cut-off, so you’ll need to stay on top of it and switch to a new account whenever rates start to fall.
Turn to investments and pensions
You should be aware of how important pension contributions and the compounding effects of investments are. If you have surplus cash, consider topping up your pension contributions or even investing in a Stocks & Shares ISA. These strategies are meant to payout in the long-run so don’t worry about the dips and valleys of the market, you’ll usually have plenty of time to balance them out. It’s a surefire way to beat inflation as it not only preserves the value of your money, but can also help to grow it.
Take action now
With a solid financial plan, you won’t need to worry too much about the impact of inflation, but it’s important to routinely review your plan to ensure everything is still on track. To protect your money from inflation, take action now; call the experts at Dental & Medical Financial Services today.