What is The Negative Effect of Inflation on Household Savings?

[AnonBitCoiner]

People do realize that prices seem to go higher all the time, they remember the days in which they could pay a specific price for a product and now they see that product is many times more expensive, what they do not know are the reasons this happens and what to do about it, if they knew I would guess many more people will take proactive steps to protect their wealth, but since they do not, they just accept inflation as an inescapable fact of life, not realizing the huge mistake this really is.

The major reason behind this is that those who have money will never realize that everything is getting expensive until they spend all their money without planning. So this fact can be felt by poor people only because they know the value of money better and they know that how difficult is to fulfil the needs and eat well in such situations of inflation.

People often spend more and more but when they needs some money for necessary work then they does not posses such amount for managing that thing therefore one should realize and should teach his children also that saving and investment has greater importance in their life to handle an expenses during the condition where you needs money.

[Youngkhngdiddy]

right if inflation will high then it will effect on our saving in the bank, securities exchange and other markets. just i keep saving some portion of my assets otherwise i mostly invested in cryptocurrencies, i know it's high risky to save money in the bank, profits is also big. still i can't buy gold but i am interested.

  Depends on the type of bank you use and the type of the saving account. In some of them there would not be any effect since a characteristic of the saving account would be the adjustment with the inflation rate. But in some of them , the real value of your money would decrease. Imagine having money that will gradually lose its value unless you actively invest it in a business. If you work an 8 hour job you probably don't have time or the ability to start a successful business, and therefore have a huge incentive to consume and buy goods immediately, so that your money doesn't lose its purchasing power. The biggest problem is that if you expect prices to go up rapidly you just buy commodities. Certainly no one would buy a bond or lend money since the principal would be wiped out in purchasing power by inflation.
  A small amount of inflation is actually necessary for economic growth. At zero inflation, money sitting in an account can be more valuable than taking an economic risk. That reduces investment. The flip side of inflation is interest, which is the inducement to invest. When the economy is not running at capacity, meaning there is unused labor or resources, inflation theoretically helps increase production. More dollars translates to more spending, which equates to more aggregated demand. More demand, in turn, triggers more production to meet that demand.

[doomloop]

I don’t really see any future with bond investments, I am afraid. Yes it’s less risky and more stable but I believe more risk equates to more profit and I do want more profit. I am trying to grow my money for the future so bitcoin is the choice for me. Not stocks and most definitely not bonds.

How can you say that it is less risky if you don't see a future with it? I think a Bond is also like a Crypto, I mean there are also different types of Bonds under that term and pretty sure there will always be a Bond who are worthy to pick up and use for investment. If we have an interest with them, we can study them, and that removes our fears but if not, it's fine to stick with the ones that you like.

No one is forced here anyway. More risks doesn't always equates to more profit and wanting more profit may sound a bit off. You need to stay realistic so that you won't be in danger. BTC is highly volatile but the good thing about it is that its price can recover and makes sure its growth are more than what it lost. No wonder why people like you are not afraid to invest on it for the long term.

[Mauser]

If you want an advice you can just think to invest your money in bond because Central Banks will decrease interest rates in the long run because inflation is falling sharply.

Bonds offer decent investment opportunities, but they are not risk free and are quite expensive at the moment due to the high interest rates. High inflation usually means high interest rates at the same time and let's investors look for new investment opportunities to get better returns. Investing in corporate bonds offers the highest returns, especially the junk debt pays high coupons, but they also have the highest chance of defaults and losing our money.
I don't think people get poor from saving money, they might not become rich, but at least they shouldn't be worse off. For me saving is the first step of taking money out of my monthly income and protect it from not spending it during the month. Once the money is out of my main bank account that I use to pay bills and any other purchases, I will look where to invest that money. Some form of cash like saving is important so can cover any emergency. In case all our money is invested we could be forced to sell at unfavorable prices to cover our financial needs. Crypto currencies are a great form of investment that should be part of any portfolio. Taking profits in a portfolio is fine too, the question is then what will we do with the money. Investing is definitely the best option for what we can do with our money, it's going to lead to the highest long term returns. The issue with invested money is that short term price fluctuations can send the price down and lead to loss if we are forced to sell. Which is why I think that everybody should have at least some savings to cover emergencies to not be forced to sell at unfavorable times.

[Rockstarguy]

Of course, savings that have been saved for a long time and when they are used in an inflationary situation will no longer have any value, so what you have been saving for a long time could be wasted.
Everyone will be afraid of their savings. That's why the wise ones usually don't just save in savings, but in other investments such as property, gold and currently the trend is, of course, bitcoin [crypto], because investment will actually increase compared to the savings made.
At least the investment made will not be worse than just saving when inflation occurs.

Saving will always be affected negatively when their is inflation, their is no way that savings wont be affected . In time of inflation savings can't help  because the price of everything will be very high. What people needs to survive in the time of inflation is investment,  that is why while saving investment needs to be considered because when their is inflation the money made from every investments adds more value.

In this present inflation that we are facing every commodities  investment are adding value while the money that is kept in the bank is loosing value on a daily basis.

Investment is always a way  to make money more valuable,  savings can never make money to add value instead while saving money depreciates

[DabsPoorVersion]

I don’t really see any future with bond investments, I am afraid. Yes it’s less risky and more stable but I believe more risk equates to more profit and I do want more profit. I am trying to grow my money for the future so bitcoin is the choice for me. Not stocks and most definitely not bonds.

How can you say that it is less risky if you don't see a future with it? I think a Bond is also like a Crypto, I mean there are also different types of Bonds under that term and pretty sure there will always be a Bond who are worthy to pick up and use for investment. If we have an interest with them, we can study them, and that removes our fears but if not, it's fine to stick with the ones that you like.

No one is forced here anyway. More risks doesn't always equates to more profit and wanting more profit may sound a bit off. You need to stay realistic so that you won't be in danger. BTC is highly volatile but the good thing about it is that its price can recover and makes sure its growth are more than what it lost. No wonder why people like you are not afraid to invest on it for the long term.

Maybe what he meant by that is he doesn't see any future for him when he does bond investment. Considering that this as a less risky investment compared to Bitcoin which we all know the possibility of losing a lot of money in a short period of time due to its volatility. Aside from that, as he sees no future in investing in it, that's maybe because he feels having a quicker profit when he invests in Bitcoin than bonds or stocks.

[South Park]

It's true, imagine what you could have done with your currently salary but five years ago? If I made this salary 5 years ago, I would have been so rich that I would be able to buy a car every one year, just from my savings. Obviously I live in a high inflation nation, and not like some Swiss person who doesn't feel it too much.

I think this is why we should consider that savings in fiat is not a smart move, this is why I keep my money in bitcoin, it makes it a lot better. I get that it is not that simple and we are going to feel some pain eventually if we are not careful, but if we could make it work then we are going to benefit from it eventually. Life will always be tough and we are going to need help if we do not consider inflation.

It is because of this that those that are wealthy are often asset rich but cash poor, meaning they have very little money on hand because all of their money has been used to buy real estate, companies, stocks, gold, art or bitcoin, and since that is what those people are doing then we need to imitate them according to our possibilities, and without a doubt investing some of that money in bitcoin is a good choice, since not only it can protect you against inflation, it can also help you to beat it.

[Obim34]

It's true, imagine what you could have done with your currently salary but five years ago? If I made this salary 5 years ago, I would have been so rich that I would be able to buy a car every one year, just from my savings. Obviously I live in a high inflation nation, and not like some Swiss person who doesn't feel it too much.

I think this is why we should consider that savings in fiat is not a smart move, this is why I keep my money in bitcoin, it makes it a lot better. I get that it is not that simple and we are going to feel some pain eventually if we are not careful, but if we could make it work then we are going to benefit from it eventually. Life will always be tough and we are going to need help if we do not consider inflation.

It is because of this that those that are wealthy are often asset rich but cash poor, meaning they have very little money on hand because all of their money has been used to buy real estate, companies, stocks, gold, art or bitcoin, and since that is what those people are doing then we need to imitate them according to our possibilities, and without a doubt investing some of that money in bitcoin is a good choice, since not only it can protect you against inflation, it can also help you to beat it.

Of a truth, I don't know how this rich dudes actually strategies themselves, I know of some very rich people and you don't actually see them with cash or see huge money left in their account, most at times I see them take loans and wonder despite how rich they are, why they still prefer taking loan something that an average man would do that is what they intend doing. It's already clear that all what they do with their money is investment of different kinds, now we have known about Bitcoin we can aswell add it to our investment scheme.

[poodle63]

Of a truth, I don't know how this rich dudes actually strategies themselves, I know of some very rich people and you don't actually see them with cash or see huge money left in their account, most at times I see them take loans and wonder despite how rich they are, why they still prefer taking loan something that an average man would do that is what they intend doing. It's already clear that all what they do with their money is investment of different kinds, now we have known about Bitcoin we can aswell add it to our investment scheme.

rich people can easily have access to money, they just use credit card for it with limit thats not average people gonna have and that for most of the time already settled their need of using cash to pay for something instead not to mention that they can just get cash from atm and then those rich people can easily use their money elsewhere instead so as to not disturb their cash flow.
rich people that i've meet always take advantage of that to grow their wealth at higher rate than most of people since they got access to capital rather quite easily.
at every opportunity they always eager to reinvest and even compound their investment further to boost the growth.
thats why some people when they declare their wealth they'd state minimal amount of cash because they don't really need it thats from my experience don't know if the other rich people differs in that though.

[Negotiation]

Saving money at home and keeping money in the bank will lose it's original value within a few years. So to me it seems like keeping the money at home or depositing it in the bank. It is very valuable to buy an asset with that money, because the value of the asset always increases relative to the money. Those who have deposited money in the bank or at home have realized that at some point in their life. That they have suffered and lost monetary value.

[Bonny070]

the effect on house hold savings is that, when there's inflation in the country purchasing becomes so high. when the of petrol or food stuff triple it seif, it makes banks savings become waste of time. because the money in the can't usually buy what you want any more, family man which  has been earning 50k with 4kids can no longer meet up because of the inflation, but if they invest there money in Bitcoin or any other financial institutions, they will be able meet the economy standard. these are the things that make many Nigeria citizens are complaining about the government of the day, these presents inflation in Nigeria right now makes me understand how investment is important than bank savings.and on the long run salaries remain stagnant and food stuff are rising day by day, how is such person cupping with the situation of the country.

[arimamib]

~

Saving will always be affected negatively when their is inflation, their is no way that savings wont be affected . In time of inflation savings can't help  because the price of everything will be very high. What people needs to survive in the time of inflation is investment,  that is why while saving investment needs to be considered because when their is inflation the money made from every investments adds more value.

In this present inflation that we are facing every commodities  investment are adding value while the money that is kept in the bank is loosing value on a daily basis.

Investment is always a way  to make money more valuable,  savings can never make money to add value instead while saving money depreciates

Inflation indeed erodes the purchasing power of money over time. It diminishes the value of savings in bank accounts. The same amount of money buys fewer goods and services, thereby reducing the real value of savings. This phenomenon shows the challenge of relying solely on saving as a means of wealth preservation, especially during periods of inflationary pressure.

Turning to investment as a strategy to counteract the effects of inflation has the potential to generate returns that outpace inflation, thereby preserving and even enhancing the value of capital. Allocating funds towards assets that appreciate or generate income can mitigate the erosion of purchasing power caused by inflation and position themselves for long-term financial growth. Inflationary periods often coincide with increased demand for tangible assets, because investors seek refuge from the depreciating value of fiat currency. These investment avenues not only provide a hedge against inflation but also offer opportunities for capital appreciation and income generation.

[Princess Leah]

the effect on house hold savings is that, when there's inflation in the country purchasing becomes so high. when the of petrol or food stuff triple it seif, it makes banks savings become waste of time. because the money in the can't usually buy what you want any more, family man which  has been earning 50k with 4kids can no longer meet up because of the inflation, but if they invest there money in Bitcoin or any other financial institutions, they will be able meet the economy standard. these are the things that make many Nigeria citizens are complaining about the government of the day, these presents inflation in Nigeria right now makes me understand how investment is important than bank savings.and on the long run salaries remain stagnant and food stuff are rising day by day, how is such person cupping with the situation of the country.

You are right, inflation makes purchasing power of good reduces, cause when prices of commodities increases your purchasing power becomes less, however when it's reduced the purchasing power tends to skyrocket. That's why instead of saving my money in the bank, I'll rather invest on a business that yields daily profits, therefore I've automatically doubled my income and would also be able to withstand inflation cause I own a business that gives me high purchasing power.

 However I wonder why a man with a family made up of 4 kids settle for an income of 50k, well it depends on the country,  in my country that's too poor and it's not enough to cater for the whole family, cause how can he pay his rent , tuition fees of his kids and still maintain the feeding of his household, such person shouldn't settle for only that but rather be earning from different streams of income. In my country to maintain a family of 4 kids plus both parents one needs to be earning about 200- 300k and above in a month.

 For those salary earners in Nigeria depending on their salaries alone, my advise to them is too invest in Bitcoin if they got spare money or save up and start a daily income business cause depending on the peanut money coming from the government would not help them in this current economic situation. Moreover it's not even advisable for on to lay all their eggs in one basket.

[TEBTC]

Inflation on house hold saving is so bad that your savings is fast becoming valueless because the prices of goods and services in the market is always on the rise

[ferida504]

Just like I said, it all narrows down to what you think works best for you as some people opt to invest in bonds. I personally prefer investing in Bitcoin to bonds and securities.

I didn't say investing in Bitcoin requires high knowledge though, I just said the right knowledge and understanding. I don't think it's fair saying it requires basic computer security because we all have different levels of understanding, sometimes what I consider basic might seem very complex to you and on the other hand what you consider basic could be a very complex thing to me. I don't know if you understand my point.

In our household life, saving is indeed recommended, but if we take the wrong attitude then it can also make the value of our savings worthless, especially when saving in the bank, in the bank itself, inflation sometimes occurs which cannot be avoided, so that when there is an increase in the price of goods then interest rates have also decreased, so to avoid this, it is currently more suitable to invest in land, gold and also digital currency or crypto because it has been recognized by the world and is protected.

[Bloodseekers]

Saving money at home and keeping money in the bank will lose it's original value within a few years. So to me it seems like keeping the money at home or depositing it in the bank. It is very valuable to buy an asset with that money, because the value of the asset always increases relative to the money. Those who have deposited money in the bank or at home have realized that at some point in their life. That they have suffered and lost monetary value.

Saving of course doesn't make the money we have increase and even if inflation occurs the savings we have will reduce the value of those savings and I agree with what you say, it would be better for us to use the savings we have to buy assets that we can invest in. for the future, of course this will be a provision for us in the future and this will be more profitable than saving money in the bank which will lose value if inflation occurs.

[sunsilk]

Depends on the bonds, I'm not familiar with how the bonds goes in the US markets. But typically, the percentage of profit that comes from it really can at least defeat inflation.

But with that, if the percentage is just exactly with how much the inflation is then you've just defeated it but you didn't made some profit.

AFAIK with bonds, they're not really high in profit but they're good for low risk takers or it seems no risk at all since they're from the government.

[Hispo]

There are two types of consequences: if you have money on your bank account they lose their purchasing power because you are subjected to an "implicit tax" because your saving are cut by the increasing in the price level. So you should be able to invest your money in bond or in  the Capital market in order to close the gap with the inflation rate.

Obviously investing you can achieve more profits but losses at the same time, due the equation more yield and more risks.

If you want an advice you can just think to invest your money in bond because Central Banks will decrease interest rates in the long run because inflation is falling sharply.

As a Venezuelan who has lived in Venezuela most of my life, I can tell you that the effects of inflation, specially when it is not controlled and turns into hyperinflation are simply devastating to the household economy any average citizen of the country.
Though, I would like to be fair and point out that what happened here in this land was not normal and no serious country/administration would have allowed inflation to go way beyond 1000% anually.
People here resorted to all kind of assets, specially United States dollars and also gold/silver. Because of the bad geopolitical relationships we have with the rest of the west, people here so not have options to buy bonds from the United States and the bonds of this country are paid in local currency, which has become pretty much devaluated since the beginning of the inflation nightmare.

Bonds and stocks are only an option for people who reside in the developed world, for us who live in the developing world, it is better to go with decentralized assets, such as Bitcoin. It is a plus, since our crooked governments cannot seize our satoshis easily.

[Findingnemo]

Inflation hit pretty hard at the middle class people than anyone, and this is being the major contributing to the economic value of a country still their salary doesn't get into the same rate as inflation which forces us to reduce the consumption or work more hours to meet the same needs that we usually have. If the inflation rate is not under control then more people will struggle as above that results into domino effect and worsen the economic situation of the country further that is why it's important to keep the inflation rate under control to have stable economy.

[Youngkhngdiddy]

Inflation hit pretty hard at the middle class people than anyone, and this is being the major contributing to the economic value of a country still their salary doesn't get into the same rate as inflation which forces us to reduce the consumption or work more hours to meet the same needs that we usually have. If the inflation rate is not under control then more people will struggle as above that results into domino effect and worsen the economic situation of the country further that is why it's important to keep the inflation rate under control to have stable economy.

  Most of those who are wealthy today had either help with a loan from their parent(s), had a home or some wealth passed down to them from their parents, or had a great skill (one they built up then sold). Most of those having made money have done it thru real estate investment (which includes flipping properties, while putting others in debt), or have “bought low and sold high” and that includes retail. Others stayed wealthy by using tax loopholes, and company owners to buy their own stock. Once a millionaire they are able to depend on friends to bring them out of any hole they get into. They pat each other on the back so are always making money (even when they aren’t trying) thru the benefits they offer each other. It’s hard to explain but once you get up there it’s easy to stay wealthy.
  Taking advantage of inflation leads to more inflation, and crashes the whole economy. When people think individually, they tend to buy more, and more sooner rather than later (to take advantage of inflation) which leads to prices going up, as people lose more confidence in the currency, thus leading to hyperinflation, which is a disaster to all people, and might lead to civil disorder. Hyperinflation is usually closely followed by complete societal breakdown. Hyperinflation in the 1920s German Weimar Republic led to the rise of Nazi-ism and Adolf Hitler. So yeah, in this case, excessive inflation is "bad" for everyone.