Protecting your finances from inflation is essential to ensure that your money retains its value over time. Here are seven tips that can help you safeguard your finances against inflation:
1. Reassess your savings
The inflation rate in Ireland is around 4%1, and the interest rates offered by traditional Irish banks may not be enough to keep up with the cost of living. Therefore, reviewing your savings and considering alternative options that could help you earn inflation-beating returns is important.
2. Consider investing
Investing your money beyond your emergency fund can help you meet medium to long-term financial goals by giving your money the potential of a higher return over the medium to long-term. The funds that you decide to select for investment will have a big impact on the kind of return you can expect. There are many different funds to choose from, and a variety of asset classes and risk profiles to consider. In the following table we highlight the performance of certain Aviva funds with different risk ratings.
Gross Fund Performance to 01 February 2024
| Fund | Risk Rating | 5 Year Annualised Return | 10 Year Annualised Return |
|---|---|---|---|
| Cash Fund | 1 | 0.5% | 0.2% |
| Multi-Asset ESG Active 3 | 4 | 2.4% | 2.5% |
| Cantor Multi-Asset 70 Fund | 5 | 10.7% | 8.5% |
| High Yield Equity | 7 | 15.3% | 12.8% |
Source: Longboat Analytics to 01 February 2024. Performance is quoted gross of fees. ESMA Risk ratings 01 February 2024. For more information on the operation, benefits, and risks of investing our funds, including how we risk rate them please see ‘Your Investment Guide'.
3. Avoid market timing
Trying to time the market can be difficult and risky. Instead, adopting a long-term approach allows you to weather short-term storms while capitalising on long-term trends.
4. Trim your regular costs
Rising prices can make it challenging to manage your finances effectively. Therefore, it is essential to review your everyday expenses and ensure you get the best deal on services such as phone contracts, home broadband, and insurance.
5. Change what you buy
Switching to supermarkets' own-brand products can help reduce your grocery bills, and you could also consider switching to more cost-effective options for other items you regularly buy.
6. Get the best mortgage rate
Ensure you are on the most competitive mortgage rate to ensure you are not paying more than you need to.
7. Talk to a Financial Broker
Speaking to a financial broker can help you get professional advice on managing your finances effectively and protecting your investments from inflation.
1 Source: CSO January 2024.