Saving in time of inflation is very important for survival. Inflation is like an economic predator that robs you of your financial decency, even in saving money, no matter how hard you try. It’s like trying to fill a cup with a tiny hole at the bottom: the more time passes, the less you have in real terms; you see how important saving in a time of high inflation is a great skill?
In Nigeria, we are no strangers to inflationary pressures. From rising food costs in our markets to electricity tariffs to our ‘ darling dancing Naira,’ saving becomes an uphill task.
To survive in a high-inflation economy like ours, it is best to go beyond a standard savings account, which usually offers a low interest rate that doesn’t keep up with rising prices.
The best option remains to look into options that provide higher returns or more stability.
Here are some practical tips every Nigerian needs to know;
Inflation is the enemy
The first step to solving a problem is to understand the problem. Inflation means that the value of money decreases over time. As prices rise, the same amount of money buys less. To outsmart this plague, it’s crucial to understand that simply keeping money in a savings account with low interest rates won’t protect it from inflation. You’ll need to make your savings work harder.
Diversify your income stream
Relying on a single income stream can make saving difficult, especially during inflation. To protect yourself, diversify your income. This could mean taking on side hustles, freelancing, or investing in small businesses. Consider small-scale businesses that cater to essential goods or services which are less affected by inflation.
Consider Foreign Currency Accounts
Opening a foreign currency account (USD or Euro) may be wise, as these perform best during inflation. This can help protect the value of your savings from the depreciation of the Naira. However, when considering foreign currency savings, it is important to weigh the exchange rates and other associated costs.
Digital Savings Platforms
Some financial technology (fintech) platforms offer savings plans with interest rates higher than banks. These accounts offer better interest rates than regular ones, though they might not fully outpace inflation.
Invest in Assets That Hedge Against Inflation
Investing in assets that typically perform well during inflationary periods is smart work. Examples are real estate, gold, and stocks. They appreciate over time and tend to outperform inflation.
Money Market Accounts
These accounts invest in short-term, low-risk instruments such as treasury bills and commercial papers. They offer slightly higher returns than a standard savings account, making them more resilient to inflation. You’ll enjoy stability and liquidity—you can easily access your funds if needed.
Government Treasury Bills (T-Bills)
This is one spot-on strategy. Treasury bills are short-term investments the government issues, making them low-risk. They pay out slightly higher returns than traditional savings, which are worth considering in high-inflation times. Even though T-Bills might not completely offset high inflation, they provide a better hedge than keeping your money in cash.
Track Your Expenses
Creating a budget is essential in a high-inflation environment. Track your income and expenses closely, categorizing them into necessities and luxuries. Allocate a fixed percentage of your income towards savings before spending on anything else.
Stay Patient and Trust your Guts
Saving during inflation is not always easy, but consistency is key. Starting is important even if you can only afford a small amount each month. Over time, these small savings can grow into a significant amount. Patience is critical—don’t panic or make rash financial decisions during periods of uncertainty.
Seek Financial Advice
Finally, if you’re unsure where to start, consider seeking the advice of a finance expert or consultant. They understand how the economy works and can guide you on protecting your savings, investing wisely, and creating a long-term financial strategy that works in an inflationary economy.
Conclusion
Saving in a time of high inflation in Nigeria may seem daunting, but with the right strategies and mindset, it’s possible to protect your wealth and even grow your finances. Remember—inflation is the enemy. Put your naira to work in ways that counteract its effects.
SAVING IN A TIME OF HIGH INFLATION
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