How Inflation Impacts Your Savings & Investments
High inflation has become a growing concern for both consumers and investors in the UK. It has been a prominent subject in the media and has been noticeable at the supermarkets and petrol pumps.
Rising prices erode the purchasing power of money left in savings accounts and impact investment too. So, an understanding of the impact of inflation is key when we are considering wealth creation.
What is Inflation and Why Inflation Matters to Savers and Investors
Inflation is the term for the majority of prices rising over time. It is the speed at which prices are rising. So, a “falling inflation” means that prices are rising slower, not that they are decreasing.
Savers benefit from certainty of capital value, but they do not benefit from certainty of purchasing power.
- Savings lose purchasing power if interest rates don’t exceed inflation. Your money buys less goods and services over time.
- Asset prices tend to rise faster than inflation, so that