Inflation vs Deflation: Does it affect your savings habit?

With matters arising, it's never a surprise to see some interesting talking points that can be explored in each trend. This same thing is visible in talks about money, the economy, savings and related topics.

Inflation has been trending for a long time and I have also discussed some elements of it on my page. This time around, I came across a very interesting question about inflation and deflation and how these two situations affect the savings habit of people.

The question explores the idea of savings and the best time to do so;

In a nutshell, the idea of savings is a lot easier during deflation because consumers have high purchasing power when there is deflation. They get to spend less to get what they want. This leaves them with a decent amount that can be saved for future use.

On the side of inflation, saving money becomes harder because you have to spend more to get your needs or wants. Of course, the idea of saving money will be hard for people to dig into if they barely have enough money to handle their day-to-day expenses.

So, when is the best time to save money?

The way I like to see this is that there is no best time to save money. Savings is a habit we form because we see the good in it. Whether there is inflation or deflation, anyone that has the habit of savings will always squeeze out one or two quid which will be set aside as Savings.

The major problem with Savings which I have already noticed is that people get to save their money in the bank. This might have been a trend a decade ago, but I believe there are better alternatives at the moment.

I will use Nigerian Banks for example. The interest rate is 5% on deposits. If it's not going to be a fixed deposit scheme, you will end up incurring more expenses from the taxes and charges that will be attached to this money. In addition to that, 5% is only significant if you are planning to dump a ridiculously high amount with the banks.

That idea in itself is a loss to the depositor. Little wonder why many people only leave their day-to-day working capital with Banks. That's also the practice I adopted after working in a Commercial bank in 2020/2021. Instead of just saving huge amounts of money in Banks, investing it in more profitable places will be a better alternative.

It's even better if you are someone in a place like Hive Blockchain. The HBD savings option is a very nice option to explore. You get to enjoy 20% APR and there is no savings charge whatsoever.

Whether there is inflation or deflation, Saving Money is never a bad idea. Where you choose to put your money is more important.

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