Inflation might be something that you may believe doesn’t pertain to you, however, it affects everyone. It is the “measure of the increase in the price of goods and services over time.” When you go shopping expecting to spend only a certain amount but you end up spending more you have experienced inflation.
What effects does it have on the average person?
Inflation effects everyone differently. It can affect the cost of living in a basic sense, things such as food, electricity, and transport. However, it can also have an influence on savings account interest rates, company performance, and, as a result, stock prices.
As a result of the rise in inflation the value of your money also changes. It impacts your ‘buying power’ as it rises you are able to buy less with your money. When it comes to the cost of living, growing inflation implies that maintaining our prior lifestyle has become more expensive. If your income hasn’t increased by at least the rate of inflation throughout the measured period, your purchasing power has decreased, since the cost of goods and services has risen. This can also come to affect our savings, what we have invested, and our pensions.
How does it effect cash savers?
Cash savers can be very negatively affected by the rise in inflation. As we mentioned earlier their purchasing power is lowered. Therefore, all the saved cash is now not worth what it once was. Let’s put it this way the cost of living has drastically changed from when you were a child and chances are that once you have grandchildren it will also be drastically different than what it is currently. A high rate of inflation and a low rate of interest can lead us to the conclusion that all the money you have saved in a savings account is being downgraded. You might want to think about other ways to save, such as investing in assets that have historically risen at a faster pace than inflation. Consider inflation-linked assets, such as certain National Savings Accounts or government loans, as well as property and stock and share investments.
How it affects retirement money?
If you have been putting money aside saving for your retirement its important that the funds are under monitor regularly. If over a period of time the funds fail to go above the rate of inflation then another solution should be considered.
How it affects investors?
Being an investor, one should try to invest in products with returns that are equal to or that surpass inflation. Investing in a variety of inflation-protected assets, such as inflation-indexed bonds, can help you protect your buying power and investment returns over time. This type of investment moves in sync with inflation, so it’s not at risk of losing value.
Inflation can affect our money in all kinds of ways. It’s important to be aware and have an overall view of your finances in order to make sure you’re not losing out but rather you’re protecting your wealth.
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