How to save money in case of inflation?

1.09.2022
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как сохранить деньги при инфляции

Inflation is an uncontrollable process that does not spare anyone, neither the elderly, nor children, nor the rich and ordinary people. This means that money is always at risk.

How to save money from inflation? Are there any ways to save money? Are there any reliable options that will help protect your savings from devaluation? Let’s get this straight.

Process definition and description

The term inflation itself has a broad concept, it includes changes in the value of movable property and real estate. Many, of course, will say that this does not concern them, but in reality they are wrong. The increase in prices for yachts, steamships, steam locomotives, palaces and various equipment will also affect the wallets of ordinary citizens. This usually occurs through an increase in the cost of consumer goods.

If we look at the level of average annual inflation in recent years, we can note the following dynamics: for 15 years it was 8.66%, for 10 years only 7.3%, for 5 years it reached the level of 7.28%. Based on this information, we will describe this ” bad ” process.

What should I do? How to save your savings from inflation? You need to look for options that will help you do this. Our article describes a lot of options for where to store money, you just need to choose the right one.

Option 1

how to save your savings from inflation

The most popular method today is a bank deposit. However, its profitability is questionable. How do I save money now? Previously, to make profitable investments, it was enough to conduct a brief analysis of bank offers and choose the one that offers the highest yield.

These days, when banks close one by one, you need to pay attention not to the rates, but to the reliability of the financial institution, if you do not want to run around in the future and waste your time and nerves to return your hard-earned savings. Despite the fact that the deposits are insured, and the client will receive their money in any case, in reality everything looks different. In addition, you will receive only the money that you invested, but no one will pay you interest.

Let’s say you have savings, and you want to launch them “in business” – open a bank deposit for 12 months. The remuneration will be credited at the end of the term. For example, if there is a force majeure event at the time of the deposit validity, then you can only count on a refund of the deposit amount that you made to the bank. Due to the fact that remuneration has not yet been accrued, the fund that guarantees the return of deposits will not pay them. Of course, you can personally go to the bank and try to beat out the proper interest, but you are unlikely to find the owners on the spot. Therefore, we recommend choosing a deposit with a monthly or quarterly capitalization of interest. As soon as the interest is added to the main deposit, they are also considered insured from this point on. How do I save my savings this year?

If you make a list of the most reliable banks, you will notice that their remuneration is slightly lame. But here you don’t have to choose much. What is important for you reliability or profitability? Most banks offer an interest rate that is equal to the rate of inflation recorded in the country.

The reward can be changed at the expense of:

  • the amount of capital investment;
  • the deposit expiration date.

The larger the amount and duration of the deposit, the higher the rate that the bank offers customers.

In this way, banks can save money from inflation, perhaps not as well as you want, but you can still save most of the money. According to average statistics, banks lag behind inflation by 0.5-1% per year.

Option 2

how to save money from inflation

Bank cards are considered an excellent alternative to bank deposits. The big advantage of this solution is that you don’t need to freeze your finances for a long time. Rewards will be awarded for any amount, and you can withdraw them at any time. When choosing a card, pay attention to how the reward is calculated. Choose a daily reward, which will be calculated based on the current balance on the card. This means that every day will bring you income.

If you preferred a deposit, then you would definitely need to leave money for life, and by choosing a card, you don’t need to think about it, and besides, money for life will also bring an extra penny.

You will be surprised, but many cards are charged a reward that is not inferior to the interest on bank deposits. Of course, they lose a little on average in terms of deposit rates, but here you should take into account the fact that the entire amount works, so there is an opportunity to earn more.

A bank card is a good alternative to deposits, since there is no need to freeze money for a long period, all the money will be in operation, and remuneration will be charged monthly. In general, this is a good way to save money from inflation.

How do I save rubles?

how to save money from inflation

The ruble is an unstable currency that constantly devalues. In contrast, dollars and euros are hard and reliable currencies. According to most people, the best way to save money is to exchange it for dollars or euros. Is it really profitable? Let’s think logically? An exchange is a simple transfer of savings from one currency to another. As you know, other currencies are also subject to inflation. If we take the dollar as an example, the average annual inflation rate for it is approximately 2%. In the developed CIS countries, the average annual CPI growth reaches 7-8%, which means that by exchanging money for dollars, you will protect money from depreciation by 5-6%. We have partially answered the question. Is this exchange always profitable?

Buying a dollar is profitable only in the long run, but this method is not suitable for short periods.

Nowadays, you can also open currency deposits. The yield on dollar deposits does not exceed 2% per year. This reward allows you to close the gap that was formed due to the difference between inflation in dollars and rubles. But this result is also possible after several years. Currency deposits have the same risks as simple deposits. With a short deposit period, the probability that the exchange rate will decrease is quite high.

What should I buy to save money?

how to protect your money from inflation

You can invest in real estate. The only disadvantage of this option is that you need a lot of money. Whether this method will provide reliable protection against inflation, you can understand by studying the statistics. The explosive rise in house prices in mid-2000 is an exception to the rule. The growth in the cost of residential properties worldwide is equivalent to an inflation rate of + / – 2%. Buying an apartment in the hope that its value will increase over time is an unpredictable process. Idle housing is too expensive for the owner to enjoy, because payments for housing and communal services do not stand still. The rental of housing will partially reimburse these expenses, but even here the grandmother said in two.

As a rule, landlords ‘ hair stands on end when temporary tenants leave, after which the apartment needs major repairs. And you don’t even know what is better, so that the housing is idle or rent out and set up for major repairs.

How to save money from inflation? We will not touch on the topic of Russian real estate mutual funds, because they offer a very muddy scheme and a high threshold value for entry. If the shareholder is far away from the owners of the fund, then he will end up with nothing. And this is not fiction at all, as practice shows, this usually happens, the fund “bursts” like a soap bubble and you are left with a nose as a result.

In other countries, of course, things are better. There are specialists who invest in commercial real estate for you, then rent it out, that is, they perform all your actions. Shareholders receive dividends on a quarterly basis in the amount of 90-95% of the profit. Thus, the yield of this method varies from 5 to 8% per annum in dollar terms. In addition, the value of real estate is constantly growing in proportion to the level of inflation. In principle, this method looks good.

One share costs an average of $ 100-200. The main disadvantage of this method is that it requires access to foreign markets, and this requires a foreign broker. Answering the question: “Is it possible to protect your income from inflation?”, we can say that”yes”. The actual profit is higher than expected if you invest for a period of 3 years or more. The disadvantage of this method is that the value of real estate may occasionally subside.

How to protect your money from inflation? Is it worth investing in the precious metal?

how to save money from inflation

There are strong arguments in favor of this method. First, gold is a physical commodity whose value increases along with inflation. Secondly, gold is a guarantor against wars, economic crises and various shocks. As soon as such moments occur, the value of the yellow metal rushes up. Third, the price of gold on the world market is expressed in dollars. At a time when the dollar exchange rate is weakening, the value of gold in this currency begins to gain momentum in the direction of appreciation.

Now let’s move on to the disadvantages of this option:

  • the value of gold can fluctuate both up and down;
  • investments in precious metals can be accompanied by certain expenses (commissions, taxes)

How to save money from inflation? The ability to save savings from depreciation in this way increases along with the increase in the investment period. It is optimal to make such deposits for 3-5 years.

Bonds can also protect savings from inflation. The yield of this type of securities is 2-3% higher than inflation. Coupon remuneration is affected by the issuer’s reliability, the time of circulation of the security, and its type. For those who do not know the intricacies of the financial world, this method may seem a little dreary and incomprehensible, some may have to learn it from scratch. In the course of learning, you will encounter a lot of scary terms, such as coupon yield, default, issuer, offer, etc. However, it is scary only at first glance, in general, if you read a couple of financial articles, you will be able to understand what bonds are and how they work. If you still haven’t decided how to save money from inflation, then buying bonds that have an indexed face value is a great option. In any case, the owners of shares will receive an income above inflation of 2.5%. How to understand? For example, if the country’s annual inflation rate is 10%, you will get 12.5%.

Eurobonds refer to the same bonds, only in dollars. They can be used to get a yield of about 3-5% per year in foreign currency. In other respects, they are similar to ordinary bonds. In general, Eurobonds have the same properties as ordinary bonds. The cost of 1 Eurobond starts from $ 1 for 1 piece, and there are also securities that cost 10 000 – 100 000 dollars.

Thus, regardless of which debt securities you choose, they perfectly protect money from inflation, suitable for both short-term and long-term prospects.

how to save money from inflation

By purchasing a share, you become a co-owner of the business. This acquisition allows you to get the same buns that have solid investors who own shares in excess of hundreds of thousands of dollars.

Any company is, first of all, a business. Along with its development, the capitalization or value of shares increases. Nowadays, most companies also pay dividends to their shareholders. There are companies where a single dividend stream can more than cover the value of inflation. For example, in metallurgical companies, shareholders receive about 10% of dividends.

During inflation, absolutely everything becomes more expensive, and the company’s assets are no exception to the rule. For example, if the price of everything in the country increases, then business will automatically become more expensive by the level of inflation. What’s the catch?

Unfortunately, stocks not only grow, but also fall in price, and the fluctuation in one direction or another can significantly change by 20-30 percent. As a rule, investments should only be made in companies that have a good and stable business, and this is the problem. How do I make sure that the company is reliable and stable? What is the best way to save money from inflation?

In this situation, the most optimal solution is to acquire all the largest companies at once. Only in this case, you will not need to do an analysis of each company. If you select only the top ones, then the level of profitability will reach the average value among them. How to make money on inflation and buy all companies in one go? How much money will it take to make this idea a reality?

If you can meet this condition, you will get an average return that will be higher than inflation by 4-6% per year. However, this rule applies only for long periods, which start from 5-10 years.

Only ETF participants can make a purchase of the company. For example, the fund for Russian shares includes 42 large companies that are well-known among many investors and not only. The cost of 1 ETF can reach up to several thousand rubles. What are the disadvantages of this method?

This method is considered very risky, since no one will give a guarantee of income, since the stock market may go down, and this trend will occur not for one year, but for several years in a row.

Financial experts do not recommend investing in stocks for a short period of time. If you are counting on 2-3 years, then this method is not suitable for you.

Thus, this option, how to protect your savings from inflation, is designed for a long period. Only in this scenario, you can expect a return that will cover inflation. The wider the investment horizons, the smaller the losses will be.

How to protect your income from inflation? Many investors today associate IPOs with bonds. This solution provides the depositor with a double income. You simultaneously earn income from bonds and save on taxes.

The most reliable debt securities have a yield of about 8% per year. As a bonus, the state allows you to make a deduction of 13% of the amount that was paid. We add up the obtained values and get an annual profit of 21%.

The disadvantage of individual investment accounts is that funds are frozen for 3 years. It is not advisable to withdraw money during this period, otherwise you will not be able to use the tax deduction.

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