Keeping your money in a savings account means it’s at low risk but if interest rates are low and the level of inflation is higher the real value of your savings is actually going down.

How do I invest to beat inflation? video image
Video transcript

Inflation is the rate of increase in prices for goods and services each year. There are a number of different measures of inflation in use. Most frequently quoted and the most significant ones are the Consumer Prices Index or CPI and the Retail Prices Index: RPI. The inflation rates are expressed as percentages.

If CPI is 3 percent this means that on average the price of products and services we buy is 3 percent higher than a year earlier or in other words you would need to spend 3 percent more to buy the same things that you bought 12 months ago.

Keeping your money in a savings account means it's at low risk but if interest rates are low and the level of inflation is higher the real value of your savings is actually going down. For example a savings account with an interest rate of 1.4% isn't keeping up with an inflation rate of 2.1% so your money is going backwards.

On the other hand history tells us that investments generally provide a greater return than cash even when taking inflation into account. Deciding which investment is best suited for you is understanding what your financial goals are and how much of a risk you're comfortable with.

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Frequently Asked Questions videos 29


When should you start investing?

  The general rule with investing is the sooner you start on the longer you leave it, the better. But it’s important to make sure you’re in the right financial position to start.


What’s the difference between a fund manager, a wealth manager and a stockbroker?

You might be wondering what the roles of a fund manager, a wealth manager and a stockbroker are. Here are some of the key ways that they differ that might clear up any confusion.


What is ETF investing?

An exchange traded fund, often shortened to ETF, is a product with no active human investment oversight. It operates by systematically buying every asset within the market it is designed to track.


What is Alpha vs Beta investing?

In finance alpha and beta are the two most commonly used measurements to gauge how successfully a portfolio manager performs in comparison to their peers.


What is an investment plan?

Your investment plan should outline what you’re planning to use the money for, how long you’re willing to leave it invested and what vehicles you put your money into to achieve your goals.


What are investment bonds?

An investment bond gives you the potential for medium to long term growth on your money, so over five to 10 years or more, along with fund management expertise.


Should you invest before a recession?

The UK has had eight major recessions since the 1940s. Luckily there are strategies available to limit portfolio losses and even etch out handsome gains during a recession.


Should I invest or pay off my mortgage?

If you’re prepared to invest over a longer period, say five years, in investments that provide equity based returns then the amount you get back will likely be higher than the savings in interest on the mortgage.


What’s the difference between saving and investing?

With interest rates low and the cost of living going up the real value of your savings is actually going down.


Can I invest without risk?

Investing without risk is something we would all do if the option were available but risk is inherent in all investment decisions.


Can I invest without a financial advisor?

If you’re looking to invest or plan for the longer term whether or not you need financial advice will depend on a number of factors such as what product you’re looking for, how complicated your finances and personal circumstances are and your short and long term goals.


How can I invest and retire early?

Retirement is a great use case for investing. Generally your investment goals should have you investing with a long term goal in mind like retirement.


How do I invest to buy a house?

Investing in a fund or an investment trust is best reserved for those whose timeline to buy a home is flexible and can afford to wait out any fluctuations.


How do I invest in the UK?

The investment landscape in the UK is quite similar to the rest of the world. You can invest in individual stocks and shares in UK companies and those operating around the world.


How to invest in stocks?

Investing in stocks is one approach to investing and it’s where you buy shares in a particular company or institution. People who trade on a stock market buy and sell shares in these companies.


How do I invest in bonds?

There are a number of key considerations when assessing a bond: time, interest rate, the issuer and the economic environment. The price of every bond will reflect the likelihood of being paid back.


How do I invest for my children?

With time on your side you should definitely consider investing which will help to grow the money you put in so that when it comes to the time to gift it to your children it’s worked hard to grow larger.


How do I invest for income?

Good income investing is putting together a collection of assets like shares in companies, bonds and real estate that generate the highest possible annual income at a reasonable risk level.


How do I invest for growth?

Growth investing is highly attractive to many investors because buying shares in emerging companies can provide large returns if the companies are successful. But bear in mind taking this approach comes with higher risk.


Investing for beginners

For some people investing is about generating an additional income for now through dividend payouts. For others it’s about planning for the future and taking those dividends and reinvesting them to grow their investment further.


How do I start investing?

The key to building wealth is developing good habits like regularly putting money away every month and leaving it there to grow.


How much do you need to invest?

Once you are in a position to confidently invest you can put in as little or as much as you’re comfortable with. For example you could put away £30 a month which is equivalent to a phone contract or three coffees a week.


How investing in crypto-currency works?

Crypto currencies like the famed and decried Bitcoin are a relatively new concept. With advancements in technology retailers and businesses willing to accept it as a legitimate currency.


How does investing make you money?

There are two different ways to make money from investing: growing the value of your money, or getting an investment income – or a bit of both.


Can you invest without fees?

The short answer is no! This video explains all the fees you need to be aware of when investing.


Can you get rich investing?

There’s no hidden secret or proven formula or getting rich overnight. Investing is more about a slow, steady way to build wealth.


Can investing be a hobby?

What makes investing a hobby and what should a good investor be thinking about?


Calculating your investments

An investment calculator can help you figure out how to meet your goals.


Are millennials investing?

Apparently, millennials are generally doing a great job of stashing away money for their future.