We have been watching for more than a year, with many countries in the developed world breaking the 10% inflation ceiling and some like the UK already projecting inflation close to 19% for the coming months. Events are accelerating. As a shock measure, the main central banks are signaling new interest rate hikes of up to 75 basis points in one fell swoop.
All this is happening with deposit assets at record levels in Spain, above a trillion euros, which implies a strong loss of purchasing power of households due to high inflation.
Despite this worrying situation for the average saver, the increase in the official price of money in the euro zone is bringing back some old ghosts from the past, such as interest-bearing accounts or
Let us remember that there was a time in Spain, now far away, in which it was possible to obtain a remuneration of 4%-5% simply by parking the money for a fixed term, or even more if the entity that offered it embarked on an aggressive campaign of extratyped deposits to steal customers from the competition. An interest that, although it was not able to totally counteract inflation, was close to it.
However, the financial world has changed a lot since 2014, when the profitability of deposits went to zero.
To begin with, in these eight years, family savings in collective investment institutions have increased by an impressive 75%, according to data from Inverco, and the assets invested in pension plans have increased by nearly 17%. This can serve as an indication that, in a world where the ‘lower for longer’ has prevailed for almost a decade, there has been no choice but to invest and take risks in order to preserve the purchasing power against inflation.
This brings us to the second big difference from 2014: Eight years ago, the Western world was entering a deflationary spiral. We get used to living with very cheap money, hyperlax monetary policies and falling prices of multiple goods and services. Today, photography is very different: the cost of living is already growing in double digits, reaching levels that we have not seen since the 1980s, and the impact on the pockets of Spanish families is increasingly painful and evident. The calculation is easy: if the inflation rate is already above 10%, it is far from being able to preserve the purchasing power of the average Spaniard. There are also no signs that this scenario will change in the short and medium term.
In this challenging current environment, where the need to go from saver to investor becomes more evident every day – investment allows you to aspire to returns that help you not only to more effectively counteract inflation, but also to overcome it in the long run. -, that there are financial institutions that are rescuing fixed-term deposits as savings instruments with returns of 2% is reviving old ghosts of the past for our society.
If the average saver gives in to the temptation to use deposits as his main means of saving, inflation will continue to reduce his purchasing power and thus generate serious difficulties in terms of his standard of living. And if we consider that our society is made up of the sum of savers, the conclusion is obvious: we will become poorer. Therefore, many Spaniards will have to make an important reflection: “park” their money, or put it to work.
Fortunately, in this decade of interest rates at zero, more and more people have learned that the best way to protect themselves against inflation is to invest, doing so with a long-term focus, in a diversified manner and providing regular income, which is a philosophy that we promote in Finizens since our birth.
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