Inflation can affect your savings and overall investments in the long run. When you are saving your money, you must be aware that the prices of commodities will rise in the time to come. The value of the amount you have saved may seem enough today but in the future, it will be less for your future goals. Hence, it is always suggested to have an additional cover for your investment. Such things help ensure that the money you have earned becomes worthy of investment in any activity towards your future goals, regardless of inflation and time.
Here, in this blog, we will let you know what is inflation and how it can impact your savings and investments:
Inflation: Know About It
If we talk about inflation in simple terms: it is the rising value and cost of services and commodities in the country. For instance: if you assume that 1000000 is enough for your child’s education these days, with inflation, it will go up by 25000000 in the coming years. It’s called inflation. You can take overdraft loan or any other loans to cop-up with financial situations. The rate of inflation may differ from one particular time to another or it may rise every new year. Its a very necessary parameter to consider for financial planning.
How Inflation Affects the Saving You Have Kept in Your Bank Account?
In order to achieve your goals for the future, be it your child’s education or other expenses, you need to save a lot of amount. Inflations affect the investment you are making towards your goal like purchasing a new home or buying your dream car. To tackle inflation-like things, you should plan strategically with a big margin. You need to run a saver side in your life otherwise, you may end up in some sort of financial crisis. You can start investing your money in several types of financial institutions which can give you a good return. You can choose a low-interest loan to manage your inflation.
Let’s assume that the current inflation rate is about 6%, then you need to save another 6% with a margin so that you can easily meet the high-cost life expenses. Here, in this table, we are providing an example to let you know how 6% inflation will affect your income. For example: if a product costs about 1 lakh these days, it will rise higher and higher over the next coming years. This table will surely explain everything in detail:
| S.no | Year | Amount of Expense |
| 1 | Initial Year | Rs. 1,00,000 |
| 2 | 10th yr | Rs. 1,68,000 |
| 3 | 20th Yr | Rs. 3,02,560 |
The above table will help you analyse how one lakh savings will be worth in the time to come.
You can analyze that all your expenses will start to rise higher and higher, while the amount and value of your investment or saving will decrease by the pace of time. It becomes very imperative these days to focus on inflation also while considering saving your money or investing in the future.
Planning for Inflation: Know How?
There are several ways how you can easily plan for your inflation. Here, we are providing some strategies by which you can easily manage your financial status by considering inflation in your investment. Let’s check all these in detail:
Create a robust investment strategy: if you create or plan for a good or strong strategy, it will be like a stepping stone for all your future savings and investments. A good and planned strategy always helps the person to tackle such situations. Such things will help you ensure enough funds which futureproof the rest of your life.
Try adding inflation-indexed investment plans to your portfolios: Good ROI can easily tackle the minus points of inflation and its effects. These things will help you to tackle issues very easily. Hence, you can easily look for various types of investments which offer the best of inflaton favoured returns.
Let’s diversify your investments: if you invest money various sorts of stocks and bunds, or overdraft loan schemes, you might get some offers and discounts to ease the management of your financial crisis during inflation, but they won’t be sufficient to keep up the pace of life with the ever-changing times. You need to diversify your investments and savings in order to make sure that your amount is properly invested for the long-term goals with market-linked instruments. You will get higher returns for sure.
Summary
Inflation affects the income/savings or the investments as well. Inflation means the rising costs of various types of commodities. With inflation, the costs will go rise and rise. So, effective money management is necessary to tackle its risks. You need to save money with a margin. For instance, if the inflation rate is around 6%, you need to save an extra 6% in order to manage your savings for future goals and investments.
