Savings warning: Inflation ‘erodes the value’ of your money – how to protect your money | Personal finance | Finance


Recently, inflation hit a nine percent high in more than a decade, and many believe it could reach ten percent later this year. The Bank of England’s moves to raise the base rate have been welcomed, but savings accounts have yet to receive a rate hike that could beat rising inflation. As a result, savers have not been able to earn the desired interest and are looking for ways to protect their money.

Speaking exclusively to, senior financial planner Zoe Daglass of Vanguard shared her predictions for how the economy will perform in the months ahead and how savers will react.

Ms Daglass said: “Against a backdrop of accelerating prices, financial markets are pricing in a series of further Bank of England interest rate hikes over the next year.

“The Bank of England will likely pause its bullish cycle later in the year to allow the economy to breathe, especially if inflation falls sharply back towards target after peaking in the last quarter of this year.

“Overall, this implies a slightly shallower trajectory for UK interest rate hikes than the market currently assumes. volatility in the financial markets in the coming months.

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Speaking specifically about inflation, the financial expert discussed the best and easiest ways for savers to lessen the impact of inflation on their cash flow.

She added: “Inflation erodes the value of your cash savings over time, which is one of the main reasons investors invest in the first place – so they can potentially earn higher returns than inflation over time.

“With this in mind, provided investors hold sufficient cash for an emergency, they should consider investing. Those fearful of market volatility could divide the investment into several tranches over approximately six months.

There are a variety of products with banks and building societies that people can invest in, but some are more preferable than others.


“However, research shows that over the longer term, the benefits of bond diversification still hold true. In fact, the longer a downturn lasts, the stronger the relationship tends to be. »

In addition to this, Ms. Daglass described ways in which savers and investors can mitigate the damage of inflation on their finances.

She said: “Now more than ever, it’s important for long-term investors to stay disciplined – keep your strategic goals in mind, tune out and stay the course.

“It is premature to think that what we are seeing now will require a radical change in approach, as high inflation would have to be sustained for several years to have a longer lasting and more damaging effect.

“Even if it turns out to be more bullish than we expect, we shouldn’t stray too far from stocks and bonds because the investment alternatives are disappointing.

“Research found that (over a one-year period) gold and commodities offered a better inflation hedge than stocks if you were brave enough to experience much larger price swings and potential losses.

“Furthermore, stocks have been proven to have the best chance of achieving a positive real return at a lower level of risk over five, 10 and 20 years.”


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