Inflation Starting To Devalue Cash Savings
As prices rise globally, the value of cash is starting to fall.
Those who hold cash savings are being warned that relative to the goods they can buy, their money is becoming worth less.
Customers are starting to feel the effects of global inflation through what they buy on the high street. At present, the U.K.’s inflation rate stands at 1.2% but it is predicted to rise to 2.4% next year.
Savers have already been hit hard by the tough environment of extremely low interest rates. Based off 3-month sterling Libor rates, £100,000 deposited into a bank in 2007 would have seen an extra £6,000 generated. The same scenario in 2015 would see just £575 generated. This figure has not yet even accounted for inflation lowering the real return value.
Those With Cash Urged To Invest In Equities
In an environment of inflation, equities bring about the best returns. Share prices as well as corporate revenues and earnings grow with inflation rather than being damaged by it.
This becomes clear when we look at inflation-adjusted figures showing the return on investment. Over the last 118 years, £1 saved in the form of cash would have brought in £3. £1 invested in Gilts would have earned twice this amount, £6. However, if the money had been placed in equities, namely the F.T.S.E. 100, the return would be a far greater £340.
The option advised for the highest possible returns is clearly equities. The obvious caveat is the increased risk. Many people are put off by the fact that they could actually lose money but the data suggests the risks of volatility are more short term. History has shown that over longer periods of time, investing in stocks has provided far and away the best returns.
Debbie Day.
Mobile : 07704 311021 Felixstowe Office : 01394 775711
deb.day@hoskinfinancial.co.uk www.debbiedayifa.co.uk
THIS BLOG PROVIDES INFORMATION, IT IS NOT ADVICE. ANY OPINIONS ARE GIVEN IN GOOD FAITH AND MAY BE SUBJECT TO CHANGE WITHOUT NOTICE. OPINIONS AND INFORMATION INCLUDED WITHIN THIS EMAIL DO NOT CONSTITUTE ADVICE. (IF YOU REQUIRE PERSONAL ADVICE BASED ON YOUR CIRCUMSTANCES, PLEASE CONTACT US AT HOSKIN FINANCIAL
As prices rise globally, the value of cash is starting to fall.
Those who hold cash savings are being warned that relative to the goods they can buy, their money is becoming worth less.
Customers are starting to feel the effects of global inflation through what they buy on the high street. At present, the U.K.’s inflation rate stands at 1.2% but it is predicted to rise to 2.4% next year.
Savers have already been hit hard by the tough environment of extremely low interest rates. Based off 3-month sterling Libor rates, £100,000 deposited into a bank in 2007 would have seen an extra £6,000 generated. The same scenario in 2015 would see just £575 generated. This figure has not yet even accounted for inflation lowering the real return value.
Those With Cash Urged To Invest In Equities
In an environment of inflation, equities bring about the best returns. Share prices as well as corporate revenues and earnings grow with inflation rather than being damaged by it.
This becomes clear when we look at inflation-adjusted figures showing the return on investment. Over the last 118 years, £1 saved in the form of cash would have brought in £3. £1 invested in Gilts would have earned twice this amount, £6. However, if the money had been placed in equities, namely the F.T.S.E. 100, the return would be a far greater £340.
The option advised for the highest possible returns is clearly equities. The obvious caveat is the increased risk. Many people are put off by the fact that they could actually lose money but the data suggests the risks of volatility are more short term. History has shown that over longer periods of time, investing in stocks has provided far and away the best returns.
Debbie Day.
Mobile : 07704 311021 Felixstowe Office : 01394 775711
deb.day@hoskinfinancial.co.uk www.debbiedayifa.co.uk
THIS BLOG PROVIDES INFORMATION, IT IS NOT ADVICE. ANY OPINIONS ARE GIVEN IN GOOD FAITH AND MAY BE SUBJECT TO CHANGE WITHOUT NOTICE. OPINIONS AND INFORMATION INCLUDED WITHIN THIS EMAIL DO NOT CONSTITUTE ADVICE. (IF YOU REQUIRE PERSONAL ADVICE BASED ON YOUR CIRCUMSTANCES, PLEASE CONTACT US AT HOSKIN FINANCIAL
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