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How to protect your savings as inflation soars


Inflation continues to climb, with 8.5% reported in the U.S. for March. It is important to discover ways to safeguard your savings.


Decreased consumer prices make it more difficult to manage living costs. It is therefore crucial that you understand how to save your money.

The latest data from Tuesday shows that inflation is hot. Prices in the U.S. have soared to new heights. highest level in March since 1981. Last month’s 8.5% increase in the consumer price index (which tracks many goods and services) was compared to last year. This was slightly higher than the 8.4% increase in expected prices.

Even though real earnings increased by 5.6% in March 2021 over the previous year, they failed to match rising prices. According to the Labor Department, there was a 0.8% seasonally adjusted decline in hourly earnings for March.

The U.K. is meanwhile experiencing a surge in the number of people who are able to afford it. Office for National StatisticsAccording to Tuesday’s report, pay rose by 4%, except for bonuses in the three month period that ended February. Inflation adjusted, it meant that the actual decline in pay was 1%.

On Tuesday, U.K. data showed that there had been a partial increase in the cost of living due to the crisis. slowdown in retail sales. British Retail Consortium in the U.K. found that retail sales rose by 3.1%, against a 6.7% increase in February.

A survey conducted by Hargreaves Lansdown in the U.K., found that 27% had put less money into their savings and 25% had used it.

What can you do to protect your money?

Do not lock your money away too long

CNBC spoke with Laith Khalaf on a telephone call to discuss investment analysis for U.K. investment platform AJ Bell. He said that interest rates are still low enough that money will lose some of it’s buying power if kept in cash.

If you need to keep some cash in cash, one way is to look around for the lowest rate savings accounts. But he advised against investing in fixed-term cash savings accounts, as rates will likely rise.

He explained that you shouldn’t lock away your money for more than five years at current rates. Then six to twelve months later, rates will be higher.

Khalaf stated that it is better to look at fixed savings accounts products with terms between 6-12 months. However, he also cautioned that inflation will not be as severe as interest rates this year. 

Stock picking or funds?

Simon Goldthorpe (joint executive chairman) of Beaufort Financial said via email to CNBC that it was “recommendable” to have some wealth in cash, especially in light of rising costs of living. However, any excess should be invested.

Goldthorpe stated that investors need to ensure that their portfolios are well-diversified and that money is invested in investment that will perform in inflationary environments. 

He stated that saving should not be about the short-term, adding that while adjustments may need to be made as the environment changes, the end result will always outweigh the cost. 

Myron Jobon, senior personal financial analyst at U.K. Investment Platform Interactive Investor said that the stock market is an attractive option for investors who plan to keep their money in place for at least five more years. 

He told CNBC by email that even a “middle-of-the pack” fund would be able to outperform cash in the long term. 

Khalaf recommended that you invest in funds even though it tracks the index market, to diversify your portfolio. He suggested that a person who is looking to stock pick might put three quarters of their money in funds, and the remaining 25% in individual stocks. 

According to him, this would allow you to create a “core of diversification” even though there may be a few companies that do not fit within your chosen portfolio. It won’t have any adverse effect on your wealth overall.

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