Inflation Eating Up Your Savings

Inflation is everywhere whether its a developing country or a developed country though for developing countries it's always more than a developed country. Whatever is the case, if your savings are not beating the inflation then you are in a big loss.

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First of all, why do we save, for a better future? If we have to lose money in the future then why save you can use that money today for enjoying now than thinking about the future itself. We all do not want to pay taxes, that's a fact because taxes make a big hole in your monthly income. We do all sorts of things to save those taxes, but people don't do anything about more ruthless tax which is actually eating up your savings. I am talking about Inflation only.

Inflation I think is a kind of tax, which very few know about it. It usually goes unnoticed which makes people unprepared for their personal financial goals. It reduces your purchasing power and if you think you save money to buy something for the future, it's not gonna happen because you will always be short of money because of Inflation.

Then what's the reason, people don't think about it. It's actually the knowledge of people which do not allow them to think about it. I remember some of my uncles used to say that some things are becoming expensive (the result of inflation), but still, they keep their money in the FD of banks. Do you know the current rate of FD i.e. around 5% and the inflation is 6% that means your savings in the bank will lose 1% every year.

Then what should we do, we have to invest to grow money at a faster rate than the inflation which is called inflation proofing. Inflation proofing is an investment that always grows above the inflation rate because if we don't that we are getting poorer rather than richer. Do you know 51% of the financial assets of Indian people are being held as FD compared to only 8% which is in equity.

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This is because people don't want to take the risk. But the risk is everywhere, even in bank FD, the bank can go bankrupt, inflation and whatnot. I am not advising everyone to go for equity investment but you should plan your investment such that you should have some exposure in equity rather than everything in FD. Why people choose crypto, you know, one of the reasons is that it can beat inflation at ant given time, obviously if you play your cards nicely.

Also, people think that Gold is just for ornaments and thus it is not a good investment. If you are buying an ornament then yes, it is not so good investment but if you are buying gold as an investment then yes it can beat inflation in the longer run, at least if you buy Gold at not All-Time High. Gold cannot be inflated or printed and thus government cannot manipulate it the same as Bitcoin which makes them have stable purchasing power. But the currencies are highly inflated by the governments and thus they lose their purchasing power in the longer run.

So in conclusion, if you have to beat inflation you have to diversify your investment to include equity gold, bitcoin, and debt(risk-free) to grow your wealth.

Posted Using LeoFinance