How to Prevent Inflation From Devouring Savings

Consulting, Finance, Planning

Although deposits are starting to improve yields due to the rise in interest rates, experts find it difficult to combat the loss of purchasing power without taking on more risk.


Savers do not have much choice if they want to prevent their piggy bank from being gradually emptied. Inflation is the silent enemy of savers because over time it eats away at savings and reduces purchasing power if the money remains at a standstill. Thus, the experts’ recipe for softening this blow is clear: you have to put your money to work, that is, invest in a product with a return that can beat inflation.


To reverse the situation, it is not advisable to keep money under the mattress or stranded in a current account. The savings that we do not need to cover unforeseen events or emergencies should be put to work according to a personal financial plan, investing it in different products to obtain a return above inflation. It is not advisable to have savings paralyzed in products that do not yield anything because the rise in prices has a direct effect on the value of money. At the very least, it is necessary to beat inflation to maintain purchasing power and keep money from devaluing. And the only way to beat inflation is to invest.


The alternative can be pension plans, mutual funds or, for less risk-averse profiles, ETFs or equities. One strategy may be to have a financial advisor who can provide guidance on how to make the existing money profitable.


The specialist in investment strategies indicated that the first step to invest is to save and for this he shared some simple steps:


1. Create your budget: Keep track of what you earn against what you spend, record your necessary expenses to live (such as rent, electricity, water), take note of each expense you make. There are expenses that we could avoid (such as taquitos in the street, a blouse you liked, coffees) and above all avoid unnecessary debts.


2. Create an action plan: Once you identify your financial habits, you can set aside a certain amount for savings and investment.


3. Set goals: a. Achievable. They should be within your time and financial possibilities. b. Accountable. You must be able to set specific deadlines and amounts.


How to invest?


1. Know your investor profile. This is defined by your income, the percentage you intend to allocate to the investment, the return period, the time you are willing to invest and if you have debts.


2. Get advice from an expert on the investment instruments available.


Investment instruments: There are three types of profiles according to your personal evaluation; low profile, without risk in instruments that provide security; variable, diversify among different instruments until you find the one that suits you best and high risk, those who seek higher returns in a short time, but that may mean higher risks.


Variable risk: Shares ETFs. You can buy whole stocks or fractions depending on your budget. Solid and profitable companies back you up.


High risk: One of the most revolutionary investment instruments are cryptocurrencies, a digital medium of exchange that uses cryptography to secure your transactions, control the creation of new units and verify the transfer of digital currencies, however, although in this option you can earn a lot, the risk is also high.

  With no single solution, the consensus is to plan, diversify and take advice, without forgetting that past performance is no guarantee of future returns, something engraved in the hearts of those who have suffered a setback. With a good head, inflation can be beaten.  
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