Inflation Ate 33% of Your Savings This Year: How to Fight Back

You must have noticed that everything seems to cost a bit more lately. You're not alone. Inflation is on the rise, and it might have gobbled up a staggering 33% of your savings this year. That's why it's crucial to understand how to hedge against inflation, protecting your hard-earned naira from this silent thief.

Understanding the Inflation Threat

Imagine you tucked away ₦200,000 last year. With 33% inflation, that same ₦200,000 today only buys what ₦134,000 did back then. That's a difference of ₦66,000 – enough to put a serious dent in your budget! Inflation silently eats away at the purchasing power of your money. So, protecting your savings from inflation is crucial.

Strategies to Combat Inflation in Nigeria

Inflation might seem overwhelming, but there are ways to fight back. Here are four strategies to consider in Nigeria:

1. Invest in Assets That Typically Rise with Inflation

Some investments tend to hold their value, or even increase in value, as inflation rises. Here are two options:

• Nigerian Stocks: The Nigerian Stock Exchange (NSE) offers opportunities to invest in companies with a history of growth. While stocks can be volatile, they can potentially outpace inflation over the long term. This strategy is best for those comfortable with some risk and a longer investment horizon (think 5+ years).

• Real Estate: Property prices in Nigeria have generally climbed with inflation. Owning real estate directly or through Real Estate Investment Trusts (REITs) can be a good hedge. However, real estate requires significant capital and ongoing management considerations.

2. Increase Your Income-Earning Potential

The simplest hedge against inflation? Earning more money! Here are a few ways to consider:

• Boost Your Skills: Invest in yourself by acquiring new skills or certifications that can increase your earning potential in your current field or open doors to higher-paying opportunities.

• Explore Side Hustles: Social media offers a variety of ways to bring in extra income, helping you stay ahead of inflation.

3. Fixed Deposits (FDs)

Fixed deposits (FDs) can be another weapon to help you fight inflation. They offer a guaranteed interest rate for a specific period, providing stability and predictability for your savings. However, unlike regular savings accounts, FDs typically offer significantly higher interest rates. This means your money can grow at a faster pace, potentially outpacing inflation and preserving its purchasing power. FDs can be a good fit for:

• Risk-Averse Investors: If you prioritize security over potentially higher returns, FDs offer peace of mind with a guaranteed return.

• Goals: Saving for a vacation, a wedding, or a child's upcoming school fees? FDs provide guaranteed returns with access upon maturity. Knowing exactly when you'll need the money allows you to choose an FD tenure that aligns with your goals.

Conclusion

Inflation can feel like a never-ending battle, but by taking action and understanding your options, you can come out on top. Don't be afraid to explore different strategies and seek professional financial advice if needed. Remember, fighting inflation is an ongoing process, but with a little planning and discipline, you can protect your hard-earned money and achieve your financial goals.