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The Cost of Inflation On Your Financial Plan.


I had 5 pints (One too many) of Guinness watching Ireland play France on Saturday.

As I flicked through the news on my phone before the match kicked off I noticed all the news is inflation, inflation, inflation.

As per the Central Statistics Office figures inflation in Ireland is running at 5.5%. Put simply, inflation is the rate at which prices increase. If you did not get a pay rise of 5.5% in 2021 you will be worse off in 2022.

Inflation is the reason that a Pint cost £1.53 in 1990 compared to €4.50 now. It’s why you could buy an average house in Ireland in 1990 for €60,000 yet the average house price in Ireland today is €291,000.

And if you’ve got cash savings (in a bank account), inflation could actually have a detrimental impact. Inflation reduces the value, or purchasing power, of money over time. If you placed €100 in a safe one year ago, today it would buy the equivalent of only €94.50 of goods. Inflation has reduced the value, or purchasing power of your savings.

That’s why it’s so important to try to increase the value of our savings over time – not just to make a profit, but to minimise any loss in value as well.

There are a few things you can do to try to get the most out of your savings – and beat inflation – even in a period of low-interest. But you’ll need to take a bit more risk and invest your money in an attempt to make it grow.

Many savers are apprehensive at the concept of taking a risk with their money. But actually, it needn’t be a scary thing – especially if you take steps to manage that risk.

You know the saying, ‘don’t put all your eggs in one basket’? Savings policies through Aviva, Zurich and Irish Life will be professionally diversified. Diversification essentially means spreading your money across as many different investments as possible so that if one goes down, another one may remain stable or even go up.

Sound like too much like hard work? You’ll like this next one – I’ll do it for you!

Of course, all investments can go down as well as up so you should invest for a minimum of 5 years. These types of savings policies are ideal for the child benefit for example.  

Alan Considine QFA 086 22 22 204

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