Inflation is always bad news for those with savings as it eats away at their return. Of course, the answer to such an issue is to find a savings account that provides a larger return than the savings at hand.
To put this simply, if inflation is running at 2 per cent then you will need an interest rate for savings of over 2.1 per cent.
Index Linked Bonds
One effective way that a lot of people decide upon, is index linked bonds. These bonds are linked and pay out above the rate of inflation. However, they often require you to put your money away for between 3-5 years. However, the rate of interest is set at a fixed rate above that of the rate of inflation. This means that if the Retail Price Index stands at 3 per cent you will receive a set percentage rate above this and beat inflation loses significantly.
Taxation
Tax is also a crux when you are saving and keeping as much away from the taxman is very important. This is where the ISA allowance comes to the force. The ISA savings account allows a person over 16 in the UK to save £5,640 of cash tax free as part of a £11,280 allowance over all. The other half can be made up of stocks and shares. These ISAs are a great addition if you are hoping to keep ahead of inflation and mean you keep the money you would be usually handing over to the tax man.
Pensions
A pension is also a tax free manner of saving and enjoys fantastic tax relief. This means that those paying tax at 20% will receive the same amount back when they save for a pension. So, for instance if you save £80, the government will add an extra £20. This is to make up for the taxable income you already paid. Not only do you save on tax, but actually receive a positive boost.
Inflation
Of course, another way to save against inflation is to save money and buy fewer expensive things. For example, food shopping is subject to significant inflation, however shopping smarter and cheaper saves significantly. You can also make savings in other areas, such as insurance, mortgages, gym memberships and other direct debits. Look for credit cards that fit with your lifestyle better. If you need to repay loans try a zero per cent balance card, if you need deals try a credit card like the Krisflyer credit card. Being frugal and look for savings can allow you to fight against inflation.
Pay
It’s also worth seeing if you can earn more money by either asking for a pay rise, or taking on some extra work. This can allow you some extra money in your pay packet to battle inflation with and prevents you being stuck in the throes of the price rise problem.
All of these tips are fantastic for people looking to battle inflation and live a better quality of life.
Cormac Reynolds writes a lot of articles for a variety of financial clients and has done so for a number of years.