Inflation warning: ‘A great option’ savers need to consider to stop money losing value

Expert explains if we can invest our way out of inflation

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Even with the Bank of England voting to raise the interest rates to 0.25 percent, they are still well below inflation rates and savers will “gradually get less for their money”. In an exclusive interview with Express.co.uk, financial expert Michael Copeland from Wesleyan Financial Ltd suggested “a great option” for savers to consider to fight against rising inflation.

He said: “We all have something that we remember being much cheaper in the past, be it our favourite sweets or a pint of beer.

“This is inflation in action – simply put, a positive rate of inflation means we gradually get less for our money.

“Our research has shown people are making active changes to reduce the impact of inflation on their cash and their savings.

“We found the most popular change people have made or are planning to make is to start investing in stocks and shares.”

It’s important for Britons to understand what inflation is if they wish to keep their money from losing value over time.

With the Bank of England base rate currently at 0.25 percent and inflation now at 5.1 percent, the money left in basic savings accounts that track the base rate is most likely to be losing buying power over the long-term.

To combat this, savers need to make sure their funds are growing at the same rate as – or faster than – inflation, experts suggest.

Mr Copeland continued: “Stocks and shares is a great option for savers as it creates a better chance of securing real-term growth for their money over the long term.

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“Of course, any investment in the market comes with a degree of risk, but options like With Profits Funds can help to reduce the ups and downs of market fluctuations.

“It’s also managed to achieve the strongest possible results.”

Wesleyan’s research found that almost 50 percent of people risk seeing their hard-earned savings lose value over time because they don’t understand how inflation affects their money according to new research.

Britons may be able to potentially beat inflation with investing but only 13 percent of adults had invested their savings in stocks and shares. Investing in stocks and shares provides a stronger chance of securing real-term growth.

 

This low percentage suggests that many people do not know the real impact of inflation, and the benefits that investing may have.

To demonstrate the impact of inflation, Martin Lawrence, director of investments at Wesleyan Group gave an example.

He explained that £100 kept in the highest-interest easy access account on the market, which currently pays 0.65 percent interest, would only be worth £72.16 in 10 years’ time in real-terms, if inflation reaches four percent and stays there.

The research done was to warn Britons of inflation and how people should think about making active steps to change what they do with their money.

People should speak to a financial advisor before getting into things they do not understand.

With 38 percent of savers unaware that investing could help protect their savings from the effects of rising inflation, they may want to consider this option due to the potential returns it may bring.

Mr Lawrence said: “Inflation is very much a hot topic at the moment and many of us know it will impact the pounds in our pocket as the cost of living rises.

“What fewer people realise is the longer-term impact inflation can have on their savings.

“Keeping cash in savings accounts during a period of rising inflation and low interest rates, such as we have now, means your money is in effect losing value.

“If you can lock your money away for a minimum of five years, then it’s worth thinking about investing in stocks or investment funds, which give savers a fighting chance of beating inflation.”

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