TULISAN 2 "Why Inflation Is Eroding your Savings"

Why Inflation IS Eroding your Savings

The basic principle behind inflation is that as the money supply increases, so too does the relative price of goods and services. In reality, most modern countries with stable, or fairly stable, economies have an inflation rate in the low single digits. In essence, you would have to be earning three percent or more in additional income each year in order to avoid a decrease in your buying power. Your savings must also increase at the same rate of inflation each year in order hold their real worth. If prices are rising annually but your savings remain unchanged, you are able to purchase less with the same amount as you were the previous year. This is why keeping your savings hidden under a mattress is not the smartest investment strategy, even if you ignore the security issues. What the vast majority of us do instead is deposit our savings into the bank. The problem is, following an increase in GST, inflation has risen above the interest rates offered by banks. It is still a far safer investment than storing cash under your mattress, but not as secure as it once was.. Modern investors need to more carefully consider their options when structuring a portfolio. The best thing to do is speak to an Investment Adviser, who can help sort through your options and minimise the impact of inflation upon your savings.











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