How to protect your savings against inflation. While high inflation can be bad news for your savings, there are a few things you can do to protect your money. Use the following tips to minimize inflation’s negative impact on your personal finances:
Choose a high-yield savings account: When inflation is high, it’s important to keep your savings in accounts that outpace inflation. Luckily, high inflation often leads to higher savings interest rates. To get the best rates, you’ll need to find a high-yield savings account, some of which have rates above 5%.
Consider CDs: Certificates of deposit (CDs) tend to offer higher returns than savings accounts and lock in your interest rate for a set period of time, known as the term. But there’s a catch: You can’t touch your money until the CD matures, otherwise, you’ll be subject to an early withdrawal penalty. If you can afford to lock up some savings for a while, you can earn a highly competitive interest rate for the duration of your CD’s term, even if rates drop.
Build an emergency fund: In response to high inflation, interest rates can rise, making it more expensive to borrow money. That’s why having an emergency savings fund is helpful. If your car breaks down or your water heater gives out, you can cover the cost without taking on expensive debt.
Invest: The higher the inflation rate, the faster your cash loses value sitting in a bank account. Historically, investing — while not without risk — can lead to higher returns. This can enable you to continue building wealth during inflationary periods.
Check your spending: Inflation makes it easy to spend more without noticing. So, it never hurts to check in with your budget. If you haven’t been able to save, you may decide to cut back on discretionary spending until you have a little more breathing room.
Views: 297
