Inflation hits 9%: Finance experts say this is “a horror story” for savers

by | May 18, 2022

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Figures published this morning by the ONS reveal UK inflation has hit a 40-year high of 9%. In light of this, three finance experts share their thoughts:

Graham Wells, financial coach at Haddington-based GroWiser Financial Coaching: “The combination of high inflation and historically low interest rates could be seen as good news for borrowers. The real value of debt is being eroded by inflation, yet interest payments remain relatively low. For savers, though, it’s an entirely different story. The current level of inflation is a horror story for savers. People who view bank deposits as ‘safe’ are now suffering from very real inflation risk. The risk of stocks and shares can put people off investing, but savers need to prepare for this for any chance of capital preservation and long term wealth building. Cash and equities both carry risks, just different types. Too much focus is being placed on the immediate price rises associated with inflation. It creates anxiety, sure, and that’s because we feel the immediate pain of having less money to spend. But it’s just as important to plan for the longer term effects of inflation and that means making our money work harder. Now is the time to review pensions, investments and savings, accepting that it’s still wise to keep some cash aside for emergencies and short-term spending.”

Adrian Murphy, CEO at Glasgow-based wealth manager, Murphy Wealth“Arguing that equities are less risky than savings right now falls into the common trap of analysing two products that are not comparable. Equities are a long-term strategy to increase the overall value of the amount invested. Savings are a short-term pot of cash that can be easily accessed. With two completely different uses, it is near impossible to compare the risks associated with the products, as each risk is specific to the holder. Someone who needs to access a pot of capital in one month to buy their dream home will see the risks of equities as significantly higher than a savings account. That same person looking to build wealth for their retirement in 20 years’ time will see the inflationary risks of savings as significantly higher than holding equities. Arguing that equities are less risky than savings is the age old practice of trying to compare apples and oranges.”

Joshua Gerstler, chartered financial planner at Borehamwood-based The Orchard Practice: “For a whole generation, this is the first time that we have seen inflation at these levels. Whilst we continually tell those we look after that inflation is one of the biggest threats to their long term wealth, people are now seeing with their own eyes for the very first time that it is indeed the case. Only money needed for upcoming expenditure and emergencies should be held in savings accounts for the long-term. Everything else should be invested, mainly in equities, to benefit from the continued advancement of the great businesses of this world, to be able to share in their profits.”


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