Interest rates and inflation work in tandem; when one goes up the other goes down. Currently the UK is experiencing a fall in interest rates during the post Brexit climate as levels of high inflation return. Uncertainty around the country’s future and the fall in sterling are two of the main factors behind this chain of events.
For individuals the news that inflation is increasing is unlikely to be received well. It can affect savings and make looking after personal finances a lot harder. However, there are many ways to protect and grow your finances during times of high inflation.
Adapt Your Budget
As inflation increases, so does the cost of living. Food, services, household items and many more items increase in value quickly, while wages stay at a relatively similar level. This means your monthly finances will not go as far, and should necessitate changes to your budget. Consider cutting back on certain aspects that can be expendable or seeking out alternative financial help from Trust Two so you can live within your means.
Make Profitable Investments
Inflation isn’t bad for everyone, and there are many people who can and will profit from rising levels. It can be used to increase your personal finances, as investments in stocks and shares generally keep up with the increasing inflation levels, so they will not lose out. Meanwhile, gold is a popular commodity to invest in that should help hedge against the effects of inflation. These and more investment opportunities are a good choice during times of high inflation.
Switch Bank Accounts
With high inflation comes low interest rates, which means savings will likely suffer as these drop. A good option can be to try and switch to one of the bank accounts where interest rates do not drop as far, so your savings don’t lose out too much. This can be difficult when inflation affects the entire economy, but looking for a fixed-rate bank account with relatively high interest rates can provide some financial benefits.
If you are a homeowner then you will prosper from times of high inflation, as you will be paying back with devalued currency. You will not be affected by lowering interest rates and inflation elsewhere, nor will you need to adapt your budget for making repayments as they will remain the same. These pieces of advice should help anyone experiencing periods of high inflation and low interest rates to get by.