On 23 Oct 2019, Channel News Asia reported that Singapore’s core inflation gauge rose 0.7 per cent in September, slightly less than the previous month as it hit a more than three-year low. This was due to cheaper services, and a steep drop in the price of electricity and gas.
WHAT IS INFLATION?
Inflation is the average rate that the prices of goods and services in an economy are rising. A small amount of inflation is healthy for an economy. However, high inflation will negatively impact your savings.
HOW CAN INFLATION IMPACT YOUR SAVINGS?
Over time, inflation can reduce the value of your savings, because prices typically go up in the future. This is most noticeable with cash. If you keep $10,000 under your bed, that money may not be able to buy as much 20 years into the future. While you haven’t actually lost money, you end up with a smaller net worth because inflation eats into your purchasing power.
If you keep your money in the bank, you may earn interest, which helps to balance out some of the effects of inflation. However, your savings may not grow fast enough to completely offset the inflation loss.
HOW CAN YOU PLAN FOR INFLATION?
Inflation is one reason many people don’t put all their money in the bank – because over time, inflation can erode the value of those savings. For that reason, some prefer to keep part of their money in potentially higher-growth investments like stocks or mutual funds, because their potential returns may be high enough to offset the inflation rate.
If you need help in creating an investment portfolio which is suited to your risk tolerance and financial goals (eg. retirement at a specific age), schedule an appointment with your trusted Financial Advisor from FLA Organization today!
