The recent surge in inflation rates is a risk to our assets that many savers still underestimate. We calculate how inflation is draining your savings and what you can do about it.
7.9 percent – that’s how high the inflation rate was in June 2022 compared to the same month last year. According to the economists at Commerzbank, inflation could rise to 8.5 percent this year. We all notice what that means: when shopping, when filling up, on the utility bill for electricity and gas.
The price increases for food are particularly present. Because we usually shop several times a week and have the prices of the common products in mind, we immediately notice that butter now costs 3.29 euros or a pound of tomatoes is sometimes more than five euros.
How do you react to this? Do you switch to no-name products and discounters’ own brands or do you even do without individual products – such as meat? That relieves the household budget a bit, but what about petrol, electricity, gas or heating oil? There are usually hardly any alternatives there. Where do you get the money for it?
Are you already drawing on your savings to fill the gaps? Then we come to the topic:
What does inflation mean for your assets, for your retirement provisions, for measures that you may have already taken? What expenses do you have to reckon with in 10, 20 or 30 years in order to maintain your standard of living? Even if inflation were to fall back to four percent in the course of 2023, as Commerzbank forecasts? Without supplies from Russia, gas and oil will remain expensive in the long term, that much is certain.
Let’s say your monthly shopping basket for groceries, restaurant and cinema visits and other leisure activities is 500 euros. Let’s also assume that the 9-euro ticket is not renewed and you spend 250 euros a month on mobility: for commuting to work by train or car or for trips at the weekend.
That’s a total of 750 euros.
With an inflation rate of eight percent, you would have to spend around 809 euros next year to be able to pay for the same shopping basket. If the inflation rate stays that high, it will be around 1604 euros after ten years. We’re talking monthly. In other words: a budget of 750 euros will only be worth 690 euros next year and in ten years – in this inflation scenario – only 329 euros.
Suppose inflation drops to 4 percent in year 3 and stays there. Then you still have to spend 1151 euros in the 10th year to pay for the same shopping basket, the purchasing power of your 750 euros today drops to 459 euros.
Where is the money supposed to come from to close this gap? We can only hope that your salary will keep up with these jumps. But what if not?
Let’s look at what this risk of inflation means for your assets, your savings. What happens if you can buy less in old age with the money in your savings account or from your life, pension or Riester insurance? There, too, the consequences of inflation are dramatic.
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If you have saved well and in ten years have a balance of 100,000 euros, inflation will also melt this value. With eight percent inflation, the 100,000 euros in ten years only correspond to a purchasing power of just under 44,000 euros. In other words, you would have to have saved 213,900 euros in order to be able to buy the current value of 100,000 euros with it. So you are missing 114,000 euros – the equivalent of a well-equipped Mercedes S-Class or two Tesla Model 3.
Should inflation halve to four percent from the third year, that will help you a little. Nevertheless, their purchasing power is reduced to 61,200 euros. You should therefore actually have saved 159,300 euros in order to be able to compensate for the inflation effect. If the 100,000 are only to be available in 20 or even 30 years, the calculation becomes even more dramatic. Then the purchasing power of the credit in the first case shrinks to a paltry 8468 euros in the year 30, in the second case there are still 27,000 euros left over.
So it’s clear: If you only save money in the fixed-term deposit account, your retirement savings will not be enough to maintain your standard of living. They have to use forms of investment that clearly outperform the long-term inflation rate – be it two, four or six percent. This is only possible with an investment in the stock market. Only there can long-term returns of six to seven percent be achieved, which can compensate for the holes described.
Unfamiliar with stocks? That’s how it is for many. And it’s not a problem at all, because there’s a simple and reputable solution for that: let a digital asset manager work for you. For example our partner investify. This is a viable yet cost-effective alternative to a wealth manager at the bank. Because investify is a so-called robo-advisor that only invests your money in low-cost index funds, so-called ETFs. These are funds that follow an index, so they don’t need a fund manager — and they don’t charge their fees.
investify asks about your individual investment goals in a questionnaire and also analyzes what risk you are willing to take. The algorithm then puts together a portfolio for you from the best ETFs in the world. In terms of performance, these ETFs then follow the markets they represent. Studies show that such funds perform as well or better than a real fund manager over long periods of time. Because the expert may beat his comparative index in one year, but he may be lagging behind the next. It’s better to minimize costs, simply swim with the market and rely on global economic growth, which has always continued – even after a crisis like the current one.
If you wish, you can also focus on a megatrend in your investify portfolio that you believe has particularly good potential. You can also book investment themes from a total of 24 themed investments. Each topic may have a maximum of ten percent of your portfolio so that it remains balanced and there are not too many risks if one of your main topics does not work out. Because risk diversification is the be-all and end-all in long-term investments – try it out now. You will receive a bonus of 70 euros if you enter the voucher code “welcome22” at the end of the registration process.
The real money test of the Brokervergleich.de portal, for example, proves that this strategy works. There, investify takes first place in the 5-year rating over the period from May 1, 2017 to April 30, 2022 with a rolling performance of 18.2 percent. No other robo-advisor was able to do that during this period.
Right now, when prices are down, is a good time to start saving in the stock market. Even if many of us currently have the feeling that we cannot spare a euro for such a savings plan: If you want to be sure that you can maintain your standard of living in the future, you should take precautions and defy inflation in the way described. When you look at your balance in a few years, you will be glad you started on time.
1. Click on one of the orange buttons below
2. On the investify campaign page, click on “Become a customer”
3. Follow the steps and open your account
4. Enter the voucher code “welcome2022” at the end of the registration process
From now on you can sit back and relax. You no longer have to worry about anything, you save time and your wealth increases all by itself.
