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How to inflation proof your savings?

How to inflation proof your savings?

We all know the importance of savings. A good guide on how much to save each month would be to follow the 50-30-201 rule where you allocate 20%1 of your salary to savings or investments. Rather than just stashing all your savings in a bank account, making your money work harder for you can compound your earnings and fight the effects of inflation. 

What exactly is inflation? 

To put it into simple terms, inflation represents the decline in real purchasing power. The S$1 that you used to buy a cup of Kopi in year 2000 can't buy you that same cup now. Instead, you may need to pay S$1.50 to S$2 for it today. The amount may seem small, but think about the same effect applied to more expensive items - your HDB flat, or what about a medical bill?

Image credit: https://tradingeconomics.com/singapore/inflation-cpi

As seen on the chart above, inflation has been increasing over the years. As at August 2022, inflation is at 7.5%2, up from 7.0%2 in the prior month. This was the fastest rise in consumer prices since June 2008, with food prices rising the most in near 14 years2.

With rising inflation, you are losing purchasing power over time by simply leaving your money in a savings account with low interest rates. Thankfully, there are many ways in which you can protect yourself against inflation.

3 ways to protect your savings from inflation 

1. Look for a savings account with high interest rates  

A regular bank savings account has it merits, one of which is being accessible to your money whenever you need it. To counter inflation, banks have been coming up with savings account with competitive interest rates. Refer to the list to find out the 7 best savings accounts in Singapore.

2. Work your savings harder 

Apart from regualr bank savings accounts, you can consider alternatives such as insurance savings plans  with protection coverage. Planning for your future in an uncertain economy requires an insurance plan that builds your funds while protecting your loved ones.

For example, Manulife GrowSecure guarantees your capital at policy maturity3 and provides coverage4 against death and terminal illness. 

Manulife GrowSecure

Wealth accumulation with a lump sum payout at policy maturity

3. Start investing  

Investing is an effective way to have your money work for you and potentially build wealth. There are many types of investment products available, so it is important to consider the following questions5

  • What are the product’s benefits, risks, limitations and transaction costs?
  • What is the maximum you can lose in the worst case, and how might this happen?
  • Will this product complement, supplement or replace your existing investments?
  • Will you become over-exposed to a particular risk if your portfolio is not sufficiently diversified?

Those who are looking for both investment and insurance components can consider Investment-Linked Policies (ILPs). Learn more about ILPs and if they are suitable for you here. 

Investment-Linked Policies

Investment-linked policies (ILPs) generate potential investment returns with protection for life

 

Inflation is a fact of life - to do nothing is to look at your purchasing power being taken away from you over the years. Safeguard your future today and consider some of the alternative ways to help you reach your financial goal.

 

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    Footnotes:

    1.      https://www.moneysense.gov.sg/articles/2018/10/how-much-of-your-salary-should-you-save

    2.      https://tradingeconomics.com/singapore/inflation-cpi

    3.      Not applicable for policies which have been altered.

    4.      Please refer to the Product Summary and Policy Contract for more details.

    5.      https://www.moneysense.gov.sg/articles/2018/10/an-introduction-to-types-of-investments

     

    Important notes

    Manulife GrowSecure and its supplementary benefits are underwritten by Manulife (Singapore) Pte. Ltd. (Reg. No. 198002116D). This advertisement has not been reviewed by the Monetary Authority of Singapore. Buying a life insurance policy is a long-term commitment. There may be high costs involved if you terminate the policy early, and your policy's surrender value (if any) may be zero or less than the total premiums paid. This article is for your information only and does not consider your specific investment objectives, financial situation or needs. It is not a contract of insurance and is not intended as an offer or recommendation to purchase the plan. You can find the full terms and conditions, details, and exclusions for the mentioned insurance product(s) in the policy contract.

    This policy is protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact us or visit the LIA or SDIC websites (www.lia.org.sg or www.sdic.org.sg).

    We recommend that you seek advice from a Manulife Financial Consultant or our Appointed Distributors, or visit any DBS/POSB Branch before making a commitment to purchase a policy.

    Information is correct as at 19 December 2022.

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