When interest on money saved is lower than the the inflation rate, you lose money, right? And so there is no wise need to save money.
Fail, blogs Wise Bread, and goes on to list 5 solid reasons why you should save money during inflation as well.
- For liquidity: if you prevent even one bounced check you made your “loss” in inflation back
- For major purchases: buying with cash in hand will recoup the “loss” in inflation
- For investing: its best to invest one large chunk of money at one time — so save
- For security: while the value of cash may decline, its decline will be slow and predictable while the absolute value of a dollar bill will remain one dollar
- For preparedness: inflation can easily end in recession. Be prepared with cash
The for security reason is one of the best, I think. The example given is that when your $100 dollar investment goes down, like it did recently, it won’t pay for a $100 price increase in your rent — but $100 in cash will always pay for that $100 increase.
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