The myth
Inflation is always a concern, even for people who don’t really understand what it is. That’s because it makes the buying power go down, so your money gets less goods and services over time.
There are so many factors behind inflation, and there isn’t any way to for an individual to make this rate smaller. That’s why many people believe that you can’t do anything about inflation.
The reality
Rising inflation is usually caused by high demand for products, increasing costs of production and transportation, or a combination of such factors. There are things that a government (usually through the country’s central bank) can do to manage how high and how fast prices rise,
While one person can’t do anything to alter the country’s inflation rate, that doesn’t mean that you have no choice but to feel the pain every time you take your wallet out.
While most people say that it’s wise to ease up on spending, in reality this is just going to deprive you of your needs – that’s why what you need to look into is growing your money. That way, you may still be able to afford to maintain the lifestyle you are accustomed to.
Investing is a good way to achieve this. Of course, there isn’t any guarantee that you’ll be able to grow your money at the same speed as the increase of inflation.
Still, there’s a chance that you’ll be able to do this or even get a higher rate if you pick the right investment, and if you understand the concept of time horizon of the investments you pick.
What happens if you don’t invest? If you keep your money idle or just in a regular bank account, it’s likely to grow slower than the inflation rate. If you stash your cash somewhere physical, it won’t grow at all (and the bills will also be exposed to theft, termites or demonitization, among other dangers).
The verdict: False.
There are things you can do to try to reduce the effects of inflation on your personal finances, and investing is one of them.
One thing to remember is that if your goal is to preserve the value of your money, you may not have to pick investment products that have a high risk suitability, even if they match your risk profile (although this depends on the current inflation rate).
You may also consider starting a business to try grow your money at a rate that is at least equal to inflation, including. However, such efforts usually require a lot more money to start with as compared to investing, and they aren’t free from risks either.
What’s important is that you take steps to protect your money from inflation. That way, you’re creating an opportunity for you to have a more prosperous future.
