What you need to know about smart saving amidst inflation

October 31, 2023

High interest rates increase the income opportunity of one’s savings and investments.

In a volatile economic landscape, the importance of prudent financial planning and savvy saving strategies becomes more critical than ever. When inflation is high, the value of money seems to shift like sand beneath our feet, with a knock-on effect on interest rates and the cost of living. Despite this, it’s encouraging to see many individuals and families continuing to explore ways to save.

According to Erastus Tshatumbu the Head of Cash Investments in Retail at FNB Namibia, "Fixed deposits, notice accounts, and savings accounts are some of the most popular ways to save money for all of us. However, it's crucial to make sure that your money is working for you, as inflation can impact the value of your savings. During high inflation and market volatility, people who keep their savings will not lose value unless they decide to withdraw the cash. Interest on savings may be lower compared to the inflation rate, but the value of their savings is steady and doesn’t lose any value."

Tshatumbu explains that "there’s no one-size-fits-all approach when it comes to saving solutions, as it's dependent on one’s circumstances and goals. Hence, it’s important to explore several solutions to cater for each individual's or family's needs."

He recommends some of the following options:

  • A fixed account might be a decent alternative for someone searching for a guaranteed return on investment. For people who don't require instant access to their money, fixed accounts are among the best savings options. It offers a guaranteed interest rate for a set period. Since the interest rate will not decrease even if prices rise, this can help people shield their savings from the consequences of inflation.
  • Notice and Savings accounts provide flexible options to save money. They often have lower to medium interest rates than fixed accounts, but they also provide you the freedom to access your money anytime you need to or by providing a notice on a date which you need the money. This can be beneficial and used as an emergency fund in a short to medium term horizon..

"You don't need to halt or pause saving or investing because of a temporary economic difficulty. Saving during higher interest rate periods increases the income you earn over this time. The earlier you begin saving, the more you give yourself a better chance to grow your savings and be better off over the long term. If you have debt that is linked to the movement of interest rates, be it a car or a bond, the cost of your debt increases with inflation. It might be challenging to stick to your budget in the face of inflation, so it's critical to regularly review your finances. Keep track of your spending to make sure you are not going overboard or spending money on useless items," says Tshatumbu.







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