How does inflation affect your savings? How to fight it?

In the world of investments and even in everyday news, the term inflation is one of the most commonly heard, even though we rarely stop to think about what it actually means or how it affects us. After all, we associate it with something negative, but do we really know how it can impact our wallet? Beyond the data related to the global economy, inflation has a direct effect on something as simple as our savings.

To help you fully understand everything that affects your savings, we have prepared this comprehensive guide on inflation. Here, we will cover aspects such as what inflation is, how it erodes your savings, and, most importantly, what you can do to fight it and protect your money.

What is inflation and why should you be informed?

Inflation is an indicator responsible for measuring the general increase in prices for both services and basic products that we can add to our shopping basket. In other words, it indicates that, with the same amount of money over time, you can buy fewer and fewer things.

This is also known as the CPI (Consumer Price Index), and its mathematical formula provides a percentage reflecting whether the cost of living is rising or falling. In short: whether you have more or less purchasing power.

It is important to note that inflation fluctuates according to supply and demand. Because of this, prices rise when there is high demand and low supply, and they fall in the opposite case. Other factors also influence it, such as discounts, which can lower inflation.

For a practical example: if you keep €10,000 in an account that does not generate interest and the annual inflation rate is 3%, after one year your €10,000 will have a purchasing power equivalent to €9,700. In other words, your money loses value even if you haven’t touched it.

How does inflation affect your savings?

It is important to understand that the relationship between inflation and savings is direct. To what extent? The higher the inflation, the faster savings lose value if they are not invested.

To understand this better, here are two common cases:

• Deposits and checking accounts - If they do not generate interest, or if the interest is lower than inflation, instead of seeing your savings grow, you will see that you are losing money in real terms.
• Conservative investments - While they may offer returns, if these are lower than inflation, you are still losing purchasing power.
• Long-term effect - Even with a moderate 2% inflation, in 10 years your money could lose around 20% of its value.

As you can see, leaving money idle is no longer an option, especially if you want to protect your wealth.

Strategies to fight inflation

Although inflation can be a big problem for our savings, we shouldn’t assume everything will be catastrophic and that our savings will disappear. The good news is that there are ways to protect your savings against inflation. How? Here are some of the most effective strategies.

• Invest in assets that outperform inflation - Stocks, corporate bonds, real estate, or investment funds offer returns that, in the long term, can beat inflation.
• Invest in short-term, transparent options - Investing in company bills or promissory notes (such as those available on Inversa) allows you to obtain returns in a few months, reducing uncertainty.
• Diversification - Don’t put all your savings into a single product. Combine short- and long-term investments to stabilize your portfolio and minimize risk.
• Review your strategy periodically - Inflation changes over time, so your financial plan should adapt to new circumstances.

Inversa: your best alternative against inflation

At Inversa, we strongly believe that the best way to protect your wealth is to invest in the real economy, with products that offer:

• Short terms (between 30 and 180 days)
• Clear and transparent returns
• Commercial documentation supporting each transaction

This way, instead of seeing inflation erode your savings, you are generating additional returns. And the best part is that, besides guaranteeing great results, you will find excellent opportunities. For example, we are known for offering our clients the Inversa communities, which allow a company to build its own community with trusted participants.

Are you ready for your money to work for you?

Inflation is inevitable, but the loss of purchasing power doesn’t have to be. Following a proper strategy allows you to protect your savings while making them profitable.

At Inversa, we provide a platform to invest in promissory notes and invoices from Spanish companies, helping finance their growth while obtaining attractive returns. Discover new ways to invest and, of course, ensure the profitability of your savings.