How Inflation Could Erode Your Savings
Today's news that year on year inflation has risen to 4.4% and looks set to hit 5% in the later part of 2008 does not bode well for the legion of savers in the UK. This dying breed of careful savers will soon be hit with a worrying scenario, the fact that rates available on their savings will be less than inflation and result in their spending power being reduced in real terms.
When inflation was just over 2% and savers were receiving up to 5% on deposit and beyond, there were no issues. However, slowly we have seen the gap between interest rates and the rate of inflation reduced until many savers are now seeing the real value of their savings fall. While savers will still be better off than many others in the UK, in many ways they will be paying for problems which are totally out of their control.
Next time you are checking the rate of return on your deposit or savings account you would be advised to check the inflation rate at the same time. A good rate six months ago may not look so good now and you may be forced to tie your money up for longer periods to even stay up with the rate of inflation.
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