Stop Thief! Savers – you are being robbed.

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Stop Thief! Savers – you are being robbed.

Every year millions of savers are being robbed, the thief however is quiet and discrete and impossible to catch.

Savers are being robbed by inflation

Each year the thief takes away some of your wealth and worst of all, most of you don’t even notice.

The thief I am talking about is inflation and it’s important to understand how inflation is taking away your money year after year. The last RPI (Retail Price Index) inflation figures rate inflation at 5.4%. That means that the costs of goods and services are currently increasing at that rate each year. You may have noticed this in everyday purchases such as food and fuel.

So how does inflation take money from savers? According to the Sunday Times Best Buy list (20/11/11) the top paying savings account with no tie ins is currently paying 2.85% interest. If you are willing to tie your money up for five years the best product earns you 4.7%. Most shocking of all, according to a report by the BBC earlier this year, the average saver is only earning 0.83% interest each year!

So here comes some simple maths. If you are achieving an income of 0.83% each year on your savings, and inflation is at 5.3% how much are you earning?

Answer: You are not earning, you are losing -4.47% because inflation is eroding your wealth. So if you save through a traditional savings account, ISA, pension or any other form of savings based investment you are losing money year after year.

This table clearly highlights the facts.

Savers returns after inflation

Inflation does however help one type of investment – Property Investment, it often generates returns of 7% plus. In our next blog I will explain how you can use inflation and property investment to increase your wealth. You should also sign up to our free property investment course to learn how to invest like a professional.

2017-08-02T13:25:06+00:00 November 23rd, 2011|Blog, Pension crisis, Property investment|