\u2018How can I protect my money from inflation?\u2019 is a question that many people may be asking themselves right now. In the current economic climate, rising inflation is becoming a concern for people with savings and investments.
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The effect means you\u2019re potentially earning less money due to your hard-earned cash becoming worth less as time goes by. The negative impact of inflation upon the real value of an investor\u2019s portfolio will be a concern, particularly for the older generation with not enough investments, who may live mostly or entirely off their savings and pensions. It can be even worse if they have a decrease in income at the same time as a loss of value on their assets.<\/p>\n
If you\u2019re middle-aged or young, it\u2019s also important to consider how much inflation will affect you and your investments. Many savers may currently be receiving very low returns on their cash deposits, but with many households sitting on more cash than ever following COVID-19, protecting cash from inflation is becoming vital.<\/p>\n
Five questions to ask to protect your cash from inflation<\/strong><\/p>\n 1) Is the amount you have in cash appropriate for your circumstances?<\/strong> The amount of cash savings that a person has should always match their circumstances and income level. Since we don\u2019t know what life will bring next, we need to be able to take care of ourselves and our families \u2013 even the unexpected \u2013 without having to resort to or depend on credit cards or loans from others. It\u2019s important to build an emergency fund.<\/p>\n This should contain at least three months\u2019 worth of expenses \u2013 those are the bare minimum. It could be more, but not less than three months\u2019 worth. But since this will be at the mercy of inflation, some savers may opt to hold the bare minimum amount in cash to avoid incurring losses on the value of their money.<\/p>\n 2) Should you consider investing some of your cash?<\/strong> Ultimately building a diversified investment portfolio rather than putting all your eggs into one basket, so having some cash savings and some investments for growth, is likely to suit most people\u2019s risk profiles.<\/p>\n While past performance is no guarantee of future performance, investing some of your cash savings may be worth considering. If you\u2019re saving for a long-term goal, like retirement, then it\u2019s really important to factor in inflation. If you don\u2019t it could erode the value of your money and jeopardise your plans for the future.<\/p>\n 3) Have you maximised your pension savings in recent years?\u00a0\u00a0<\/strong> It is important to maximise pension contributions to receive tax relief as this helps you save more money for your retirement goals. Pensions are still a very tax-efficient investment for the majority of people, with tax relief on contributions, as well as tax-free growth within the fund.<\/p>\n 4) Have you made use of your ISA allowance this year, and those of your family (assuming you\u2019re feeling generous)?<\/strong> Everyone aged 18 and over can invest \u00a320,000 per annum into an ISA; those under 18 can invest \u00a39,000 each year. ISAs grow tax-efficiently, whether invested in cash or other asset classes like stocks and shares, and the long-term effects of this tax-efficient growth can be significant.<\/p>\n 5) Are you making the most of your income allowances?\u00a0<\/strong> Often, we find people squander the opportunity to use a spouse\u2019s or partner\u2019s lower Income Tax rate, or even their Personal Savings Allowance (currently \u00a31,000 for 2021\/22), by holding investments or cash balances in the higher earner\u2019s name. This could mean, for example, paying tax on interest at 45% when the spouse would pay just 20%, or even no tax at all. There is no limit on the amount of money that can be transferred between spouses, so you might want to consider whether transferring holdings to or from your partner would benefit your family.<\/p>\n Few savers will be untouched by inflation in the near future. But by asking yourself the questions above, you can mitigate the effect of inflation by making sure your money is working as hard as possible to earn inflation-beating returns.<\/p>\n INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.<\/p>\n THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.<\/p>\n","protected":false},"excerpt":{"rendered":" Five questions to ask before inflation really takes off \u2018How can I protect my money from inflation?\u2019 is a question that many people may be asking themselves right now. In the current economic climate, rising inflation is becoming a concern for people with savings and investments.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-3624","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.attainwealthmanagement.co.uk\/wordpress\/wp-json\/wp\/v2\/posts\/3624","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.attainwealthmanagement.co.uk\/wordpress\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.attainwealthmanagement.co.uk\/wordpress\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.attainwealthmanagement.co.uk\/wordpress\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.attainwealthmanagement.co.uk\/wordpress\/wp-json\/wp\/v2\/comments?post=3624"}],"version-history":[{"count":0,"href":"https:\/\/www.attainwealthmanagement.co.uk\/wordpress\/wp-json\/wp\/v2\/posts\/3624\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.attainwealthmanagement.co.uk\/wordpress\/wp-json\/wp\/v2\/media?parent=3624"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.attainwealthmanagement.co.uk\/wordpress\/wp-json\/wp\/v2\/categories?post=3624"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.attainwealthmanagement.co.uk\/wordpress\/wp-json\/wp\/v2\/tags?post=3624"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nThe first thing we would say here is that the amount of cash you have should be appropriate for your personal circumstances. What we mean by this is that the amount of cash someone else has may not be appropriate for you, because we all have different needs and wants.<\/p>\n
\nAs a general rule, the answer to this question will depend on your cash flow needs and investment preferences. But you should consider investing some of your money, even though this may seem counterintuitive.<\/p>\n
\nHow much money you get in retirement depends on how much you put in, and when. When you retire, the money you have saved up in your pension will provide an income. The bigger that pot is, the more you\u2019ll get each year to help pay for your living expenses. On average, people retiring today may need to replace about half of their pre-retirement income with savings and investments (income from pensions or other savings).
\nObtaining professional financial advice is important to make sure you\u2019re putting enough away so your retirement savings last longer. To give yourself the best chance of a comfortable retirement, you need to make sure as much as possible goes into your workplace or personal pensions as early as possible.<\/p>\n
\nDo you have an ISA allowance? Have you made use of this year\u2019s allowance and do you plan to make any changes in the future to your ISA savings strategy? Have you made use of your family\u2019s ISA allowance this year?<\/p>\n
\nYou work hard to make a living, and you should take advantage of how much money you have been able to earn. Personal income allowances give you the ability to control how much or how little tax you pay on money that has been earned over the year.<\/p>\n