The Impact of Inflation on Your Money

Jul 25, 2022 | Investments, Markets, Pensions, Retirement, Savings, Tax

Many people may be asking themselves right now: How can I protect my money from inflation? As the cost of living continues to rise, this becomes a significant concern for those with savings and investments as they see their hard-earned cash becoming worth less over time.

The impact will be especially harsh for older generations who have invested most or entirely into savings, pensions etc., since they may live off those assets while experiencing a decreasing income alongside losses in value on their investment portfolio as well!

For those who are middle-aged or young, it’s also important to consider how much inflation will affect you and your investments. Savers may currently be receiving very low returns on their cash deposits but with so many households sitting on more than ever following COVID -19, protecting this money from being squandered away should become a top priority for all investors!

Here we outline some steps you can take to help protect your savings from inflation.

Questions to ask

Is the amount you have in cash appropriate for your circumstances?

There’s no one-size-fits-all when it comes to personal finances. What works for someone else may not work for your situation.

Planning for the unexpected is important. The amount of cash savings you have should always match your circumstances, so that if something does happen, like an accident or illness, then we can take care of ourselves and our families. A good emergency fund is a great way to start getting on track!

This fund should always maintain a cushion of at least three to six months’ worth of expenses. Some may choose to keep this in bare cash to avoid incurring losses on the value of their money.

Should you consider investing your cash?

The answer to this question will depend on your cash flow needs and investment preferences. But you should consider investing some of your money, even though it may seem counterintuitive. Building a diversified portfolio rather than putting all our eggs in one basket, for short-term goals is likely going be more suitable if we want long-term success with our investments.

Past performance isn’t guaranteed as an indicator of future results but investing some funds to last throughout retirement certainly makes sense. Saving for a long-term goal, like retirement, is important. But It’s also about making sure your money grows and keeps pace with inflation.

Have you maximised your pension savings in recent years?

You might be surprised to learn how much money you need in retirement. People who are retiring today may need about half of their pre-retirement income from savings and investments.

It is important to obtain professional financial advice to make the most of your retirement savings. A financial advisor can help you create a plan that will allow you to retire with peace of mind. They can also assist you with investing your money and making smart choices about when and how to draw on your retirement funds.

Making the most of your pension contributions can help you achieve a comfortable retirement. Not only do you get the benefit of compound interest, but you can also receive tax relief on your contributions in some countries.

Are you making the most of your income allowances?

Personal income allowances give you the ability to control how much or little tax is paid on money that has been earned over this year. Why not take advantage of all that hard work and make sure it goes towards what matters most? Unfortunately, many people are not using their spouse’s or partners’ lower income tax rates. They may hold onto investments to be taxed at 45% when the higher earner would only pay 20%. This is bad news because it means that you could end up paying more than necessary! However, there is a limit on how much money can be transferred between spouses so you may want to consider whether transferring holdings will benefit your family.

It’s hard to predict what the future holds, but by asking yourself the right questions, you can mitigate the impact of inflation on your savings.

At the end of the day, it is important to protect your wealth and make sure that you and your loved ones are taken care of. That’s where we come in – our team of experts can help you create a financial plan that will safeguard your assets now and into the future.

Contact us today to get started!

This communication is for informational purposes only based on our understanding of current legislation and practices which are subject to change and are not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

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Schedule an Obligation-free Call With an Adviser

By scheduling an appointment with an adviser they will reach out to you at your requested time. 
Personal advice, whenever it suits you.

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