What does inflation mean to your savings?
INTRODUCTION you to save money wisely you need to understand,
UNDERSTANDING how marke t f o r c e s c a n i n l u e n c e your assets is the irst step toward protecting yourself against potential adverse effects.
On Tuesday, CBE released a statement on in lation. It was revealed that the head in lation is at 3.9 per cent . What was your reaction to these news? Some may have worried and others did not even know what to make of the statement as they didn’t have a clue on in lation. Should we be worried about in lation? Well, before that lets look at the basics of in lation.
WHAT IS INFLATION?
Economics Experts describe inlation as a sustained increase in prices and a fall in the purchasing value of money. I n other words, the buying power of an individual Lilangeni decreases when the price of everything has i ncreased. For example, pretend i t costs E10 to buy bread today, and the current i n l ation rate i s 3 per cent: Next how money works and what affects money. Money experts talk about year, the price of the bicycle will be E 13, assuming that price increases in step with in lation.
According to the Central Bank of Eswatini, the i n l ation i ncreased to3.9 per cent in June 2021 from 3.6 per cent in May 2021.
Is this something we should be inflation. What is that? If you want to know how inflation affects your wor r i e d a b o u t ? Pa mel a Mab u - z a f r o m Ol d Mut u a l s a i d , “T h i s shouldn’t worry people, but rather they should be aware of in lation hence make bet t e r s av i ngs a nd investments.”
HOW CAN IT IMPACT SAVINGS?
“Over time, in lation can reduce money and savings, then you are in the right place. A little bit confused the value of your savings, because pri c es t ypically go up i n t he f uture. Especially, under the pillow savings,” stated ESRIC Marketing Of i c e r S i z we S h o n g we. I f yo u keep E10 000 under your bed, that money may not be able to buy as much 10 years into the future. You end up with a bunch of banknotes which have no purchasing power. While you haven’t actually lost the money, you end up with a smaller net worth because i n l ation eats into your purchasing power.
However, if you keep your money in the bank, you may earn interest, which balances out some of t he effects of in lation. When in lation is high, banks typically pay higher interest rates. But once again, your savings may not grow fast enough to completely offset the in lation loss.
INFLATION ESCALATION
Though, Shongwe said, savings with insurance companies usually have in lation escalation ( ighter). This acts a shield against in lation. “Every year insurance companies t hat have s uch t hey give you an opti on t o c hoose i f you want t o increase your premium by 10 per cent . This helps to maintain t he money balance with in lation.” about retirement, then we got you. - By Zinhle Matsetjwa
S hongwe s a i d “To e ns ure t hat people’s savings and investments a re not a f f e c t e d by i n l a t i on, i n t heir portfolio t hey i ncorporate that plans should have interest rate that i s above plans that i s above in lation rate.
HOW CAN IT IMPACT INVESTMENTS?
Some argue t hat t he i mpact of in lation on investments depends on t he i nvestment t ype. “For i nvestments with a set annual return, like regular bonds in lation can hurt performance — since you earn the same interest payment each year, it can cut into your earnings.”
Shongwe argues that it is of essence to shop around for an investment option, and he warns that this should not be done lightly. Look for an investment that has a plan and way around in lation. Such plans should anticipate for in lation and give you money that has real net worth, not bunch of banknotes.
Who wins and who l oses when there is high in lation?
Alwin Smith wrote the following on Money Web;
Lenders are hurt by unanticipated in lation because the money they get paid back has less purchasing power than the money they loaned out. On the other hand, borrowers bene it from unexpected in lation because the money they pay back is worth less than the money they borrowed.
would have continued to work in your sound state of mind, body, and spirit. Therefore, it is not your problem that you are retiring but theirs ( company policy and the government).
At retirement age, you are now at your best
In fact at 50s, you are at your best. There is nothing to worry about; it is a big mistake to ire you.
That is why with you, nothing should change, life should continue as usual.
The following are some dos and don’ts at ive years after retirement: Avoid seeking to acquire new skills, but perfect the skills that you might have learnt 10 years ago. Every skill if well managed is able to support you throughout your life.
Avoid leisure.
Avoid debts.
Avoid buying a new car. .
Avoid getting excited with pension money to the level that you would want to start having new things altogether.
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