Saving money is one of the most important financial habits for anybody that wants to be financially independent. Most people know this already, but a lot of people are quite bad at saving. If you struggle to save, check out our simple tips to help you get started.
Unfortunately, getting into the habit of saving is only the start. Once you build a healthy savings account, it’s important that you manage your savings in the right way.
So many people make the mistake of sticking it in a savings account and leaving it. The problem is, inflation can often eat into your savings and your money may actually be losing value in real terms.
Imagine that you put $100 into a savings account with a 1% interest rate. The following year, you will have $101. But if the rate of inflation is 2%, you will need $102 to have the same buying power that your $100 had the year before. That means that, even though you technically have more money, it’s real-world value is actually less.
This is a big problem that many people are unaware of. If you want your savings to continue to grow in value, it’s important that you take steps to counteract the impact of inflation.
Move Your Money Around
The interest rates on savings accounts are always changing and banks are always offering new deals. Your current savings account may have been the best deal when you first opened it, but it might not be anymore.
Instead of leaving your money in the same savings account, you should move it around to get the best deals. Check for new savings accounts on a regular basis and take advantage of the best deals, so your money is always growing as much as possible.
Make Investments Instead
If you put your money in a savings account and let it generate interest, it will grow fairly well over the years, as long as you move it around to account for inflation.
However, if you really want to beat inflation and make a significant amount of money in the future, you should consider investing some of your savings instead. That way, they are working for you and your returns will usually be higher than the rate of inflation.
There are some great online platforms, like MetaTrader 4 that you can use to manage your investments and make trades. You will get plenty of information about markets, so you can track them and make the best investing decisions.
It is a bit of a learning curve, but once you are confident, investing is the best way to beat inflation and make your savings grow.
Consider Your Mortgage
If your mortgage is variable and inflation rates rise, you could be paying more every month, and that damages your ability to save.
Make sure that you keep an eye on inflation rates and if your mortgage payments are increasing, consider refinancing. In many cases, you can get a much better deal and save a lot of money.
Many people don’t consider the impact of inflation when they are trying to manage their money, but it’s so important that you do because it could be stopping you from reaching your financial goals.