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Inflation is a very serious issue particularly when related to savings, investments, finances and money in general
What Inflation does is to affect the purchasing power of money negatively. So let’s assume you are holding N10 Million in the bank and the inflation rate that year is 16%. It means the actual value of what your money can buy is (N10,000,000 x {1-0.16}) and that’s N8.4 Million
In Actual terms, it’d still look like you have N10 Million in the bank but the actual worth of what your money can buy is N8.4 Million Naira
As a matter of fact, the interest rate on a savings account lags behind the inflation rate in a given time. This means that the Interest rate on your savings account cannot keep up with the rising cost of goods and services in the market
How can you combat Inflation. The answer is to invest in Assets that have the potential to yield a rate of return above inflation. You could decide to Invest in Commodities or Real Estate
For Instance if you invest N4,000,000 in Real Estate, by the next year the value of the money invested would be around N5,000,000 or N6,000,000. In that case, you’ve made money in absolute terms and you have also beat inflation
Another Instance is when you Invest in Commodities say like Wheat, Rice and others. Inflation affects the prices of commodities. So let’s say a bag of wheat is N50,000 when you bought it, in the next one year, it would be worth N60,000
In Conclusion. It is a better option to invest money in real estate or commodities rather than saving in the bank to curb the effects of Inflation on money
