Hey there, in our recent webinar, we tackled investment risks that rarely make the news but can deeply affect your family’s financial future.
So, let’s dive into inflation risk— a silent threat to your savings—and explore how to protect your hard-earned money!
What is Inflation Risk?
Imagine this: prices for groceries, gas, and utilities creep up year after year. That’s inflation, and it erodes your money’s purchasing power.
Take Betty, a retiree we discussed in the webinar. In 1980, she put $120,000 into a term deposit, earning $14,400 a year in interest—more than the average full-time income of $13,500 back then!
It felt secure, and she slept easy knowing her bills were covered.
The long-term impact
Fast forward to 2005, Betty, now 85, still had her $120,000 in that term deposit but interest rates had dropped to 5%, giving her just $6,000 each year.
Meanwhile, the average income had soared to $56,000.
Inflation had outpaced her earnings, slashing her income’s real value by nearly 90%. Without the age pension, she’d have struggled to pay bills, buy food and maintain her lifestyle.
Term deposits don’t grow, and when inflation rises, your fixed returns buy less and less.
What you can do
To fight inflation, consider investments with growth potential, like shares or property.
In 1980, Betty could’ve bought three homes in her home town for $40,000 each with her $120,000.
Over time, those properties’ values and rental income likely would’ve risen, keeping pace with inflation.
When thinking for the long term you can start small with a diversified managed fund and chat with a financial planner to balance safety and growth for your family’s future.
Inflation risk is like a slow drip, quietly draining your savings’ value. It’s not the stuff of headlines, but over decades, it can derail your dreams.
Don’t let it catch you off guard!
Review your investments, think long-term, and seek advice to keep your money working for you. You’ve got the power to build the foundation for a strong financial future!
