Inflation and a high inflation rate can be a silent killer of your savings and your wages.

Don’t worry, there’s no need to panic. Although inflation can be pretty devastating, especially in extreme cases, there are things you can do to offset the effects.

Some things you’ll have no control over but even just being aware of inflation will help put you in a better position.

What is inflation?

Inflation is the percentage that the price of goods and services increase.

Prices rise and what you can buy with your money might be less than what you might have been able to buy in the past. A coffee that costs £2 today, might cost £5 in a few years.

If things get more expensive, you’ll be worse off unless your salary or savings are also growing. This is because the purchasing power of your money drops over time.

A little bit of inflation is good because it means the economy is healthy and growing. Too much inflation however can be pretty devastating.

What does inflation affect?

It can impact just about every area of our lives.

Your mortgage, your groceries, your transport, your beer.

Sometimes inflation happens because a rise in production costs causes higher prices. It can also happen if there’s lots of demand and low supply, which also drives up the price.

Currently lots of countries are creating lots currency out of thin air and pumping it into their economies in order to boost the negative situation caused by the coronavirus. There is a risk that doing this can lead to higher rates of inflation as the value of the currency drops.

What is the current inflation rate?

Currently the inflation rate in the UK is 0.7%, which is historically pretty low.

However, this is an artificial rate. Because of lockdowns and restrictions, people are being prevented from spending their money how they normally would.

The UK targets an inflation rate of 2% each year. This figure gives a good balance of economic growth without prices getting too high.

How can I protect myself against inflation?

Sadly, if you keep all your money in cash - it’s inevitable that what you can buy with that money will decrease over time.

Having some cash and an emergency fund is a great thing. Have too much and you run the risk of inflation eating away at your wealth.

So it’s important you try to take measures to protect yourself against inflation.

There are a few ways you can try and grow your wealth to outpace inflation:

  • Investing in stocks and shares or index funds because they tend to be inclusive of any effects of inflation.
  • Try and use a savings account that offers an interest rate higher than the rate of inflation.
  • Use alternative assets like Bitcoin or Gold.


Inflation isn’t something you need to be scared about but you do need to be aware of it.

Sometimes government inflation rates aren’t completely reflective of what’s going on and the prices of things in the real world.

Governments can sometimes benefit from inflation as it technically lessens the value of their debts. If you’re a homeowner with a fixed rate mortgage, it can also be good news.

However, if you’re a saver or planning for retirement with a pension - it’s important to take steps to hedge against the effects of inflation by using assets that will hopefully grow. Just pretend you’re Pac-Man and try to outpace the inflation Ghosts!