News Question of the week: The consequences of inflation – higher prices, less return?

News Question of the week: The consequences of inflation – higher prices, less return? News always well informed

Friday, 03.02.17 , written by Annabell Meyer After being below one percent in Germany for over two years, inflation has now come close to two percent. In January, the inflation rate jumped to 1.9 percent and has aroused the specter of “creeping inflation.” Savers, in particular, now have to rethink so that


Welches Sparmodell zahlt sich trotz der Inflation für Sparer aus

Many savers do not know where to go with the money due to inflation

Life in Germany has become more expensive in January. Consumers had to pay more for rents, food and energy costs, among other things. In particular, the price of oil picked up significantly at the beginning of the year, with inflation at 1.9 per cent in Germany at its highest level since July 2013 .

However, not only Germany is affected by the rising rate of inflation, but also the entire euro currency zone. For the European Central Bank (ECB) this is a desirable development. It aims for an inflation of two percent for the euro area. In Germany, economic experts expect overall moderate inflation in 2017 of about 1.4 percent. In 2016, it was around 0.5 percent. What the ECB is pleased, but brings savers in the dilemma .

50 million marks for a roll: What does inflation mean?

Inflation means that the money loses value. For consumers, this basically means they get less goods for the same amount of money . One reason for this may be that more and more money is being circulated without more goods and services being offered at the same time.

One of the most well-known examples of monetary devaluation dates back to after the First World War. At that time, the government was printing huge amounts of money to curb public debt. Although there was more money overall, the amount of goods remained the same. As a result, prices rose, so that everyday goods such as bread rolls or a newspaper have suddenly cost several million marks instead of just a few pennies before.

Consequences of inflation: winners and losers

A big winner of inflation is the state. Because the inflation rate is above the amount of interest, to which he has borrowed money, reduce his debt. The same applies to private individuals who have taken out one or more loans.

As a result of inflation, consumers have to pay more for their standard of living . The higher prices for electricity, food and services are reason enough for many people to think carefully about what they want to do with their money. Some companies are threatened by sales losses because their products are sometimes less well received.

Investors save themselves by inflation poorer

Inflation is becoming a real dilemma for many savers. Thanks to the ECB’s interest rate policy, they have for years received hardly any interest on traditional investments such as a savings account. In the course of inflation , their money now loses significantly more value than last year, so many investors save themselves poor. The magazine ARD Plusminus calculates together with the Flossbach von Storch Institute an example of a loss business:

Anyone who invested 10,000 euros over ten years in the last year and receives an average of 0.3 percent interest, has less inflation at the end of the term due to the 0.5 percent inflation than at the beginning (9,800 euros). With the current rate of inflation, the loss would be even higher.

New savings models with more risk tolerance in demand

In order for consumer spending to be worthwhile despite the effects of inflation, they should rethink their approach and focus on other savings models. “We just have to learn to save ‘differently’ than before. The securities savings plan is the better instrument in times of low interest rates as Tagesgeld or savings account, “emphasizes Chris-Oliver Schickentanz of Commerzbank opposite the Handelsblatt. So far, only a few savers are willing to take risks with the investment and thereby lose a lot of return . Experts like Thomas Richter of the fund association BVI therefore demand more support from the policy for share-oriented savings.

However, stock prices can fluctuate widely and are therefore not the best savings option for all customers. Some people want more security for their investment, for example, because they want to build reserves for their family. For them, it might be better to combine different investment options . These money-saving tips help savers find a suitable savings model for their personal life situation.

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