At a time like this when inflationary pressure is eroding the naira of its value, DARE OLAWIN suggests ways of keeping savings from being depreciated
It is a good idea to save a certain percentage of whatever individuals earn as income. No matter how little, saving money is a way to save oneself from unnecessary financial pressure when it arises. There are different reasons people save money. It may be for a particular objective like acquiring property or funding various programmes or events. It may be to fund an investment or to run a charity, among others.
Money can also be saved for precautionary motives, that is, to take care of emergencies like health challenges, a fall in business, natural occurrences, like fire, flooding and other incidents. People also save money for speculative motives. According to the Economic Times, speculative motive is a tactic used by investors/traders to hold cash to make the best use of any investment opportunity that arises later on.
Maintaining a fair amount of liquidity in one’s portfolio is one of the top priorities for an investor. Generally, investors keep a fair amount of such cash with them to earn higher profits.
There may be chances of interest rates going up in the future, thereby, giving higher returns on investment. In such a situation, the cash kept aside by the investor equips him to exploit such an attractive investment opportunity.
In a country like Nigeria where inflation is affecting the economy, saving money for any of the above-mentioned motives must be done with serious caution else the amount you saved yesterday might become a chicken feed tomorrow.
According to the latest data from the National Bureau of Statistics, Nigeria’s inflation rate increased to 33.95 per cent in May 2024, representing a month-over-month increase of 0.26 per cent points in the headline inflation rate from 33.69 per cent recorded in April.
The report read partly, “In May 2024, the headline inflation rate increased to 33.95 per cent relative to the April 2024 headline inflation rate which was 33.69 per cent. Looking at the movement, the May 2024 headline inflation rate showed an increase of 0.26 per cent compared to the April 2024 headline inflation rate.
“On a year-on-year basis, the headline inflation rate was 11.54 per cent points higher compared to the rate recorded in May 2023, which was 22.41 per cent. This shows that the headline inflation rate (year-on-year basis) increased in May 2024 when compared to the same month in the preceding year (i.e., May 2023).
To avoid this, individuals must make efforts to prevent their savings from being devalued by taking some necessary steps.
Invest in real estate
One of the greatest ways to secure the value of money and keep it multiplying is to invest in reasonable real estate businesses.
Buying lands and other landed property is a good investment. Except there are natural disasters, lands are known for their appreciating prospects over the years. A plot of land bought today might have doubled its amount in a couple of years, especially in fast-developing areas. This is why people buy land in acres and keep them for years before deciding what to do with the lands.
Instead of keeping the money in an account where inflation gets devalued, people who understand business invest the same in real estate.
However, one must be careful when buying property. It is important to carry out thorough investigations before investing money in land or real estate. Make sure the area is not under government acquisition and that you are buying from the right source.
Don’t allow yourself to be scammed and avoid a property that is enmeshed in dispute. Also, keep your eye on your property after a successful acquisition to prevent it from being taken over by land-grabbers.
Keep your money in high-interest-yielding savings accounts
When you save your money in an account, please speak with your bank about interest-yielding accounts. A high-interest-yielding bank account is a type of bank account that earns interest above normal savings accounts. The interest is typically paid by the bank to the account holder, usually monthly, daily or annually, as a percentage of the average balance in the account.
Today, fintech like Palmpay and Opay have high-interest-yielding accounts through which customers get returns on their money daily. Also, one can discuss with account officers in commercial banks to know that can earn interest that is above the normal savings interest.
The benefits of high interest-yielding bank accounts include earning interest on deposited funds; low risk; liquidity, that is, easy access to funds; giving potential for long-term growth; and encouraging saving and financial discipline, among others.
When selecting a high interest-yielding bank account, consider factors such as the interest rate, the minimum balance as well as the terms and conditions. The crux of the matter is that your money is safe and gathering more value instead of getting depleted.
Invest in gold and other precious metals
Another way to preserve the value of your money is to invest in precious metals like gold, silver, diamond, and others. These items do not lose value, they appreciate as time goes by. Invest in them and keep them in places safe from thieves or natural disasters.
Keep some hard currencies
This does not mean being a currency speculator, but keeping some money in dollars or pounds could help prevent devaluation. Get it right. Don’t convert all your naira to hard currency because there are chances that you run into a loss when the local currency rebounds.
Corroborating the above, an investment expert, Adewale Adedeji, said the rise in Nigeria’s headline inflation was a lesson that one should engage in what he called smart saving.
To prevent losing the value of one’s savings, Adedeji advised investment in commodities like palm oil, maize, cocoa, and others.
“This is a simple example for ordinary people to understand and it is within their reach to source and store. For example, those who bought maize around January are sure to sell and make impressive profits; the same with cocoa beans, which are now priced in US dollars. This is better than foreign exchange trading and speculations. It does not harm the economy, rather it attracts foreign exchange to the country,” he stated.
The analyst also advised individuals to invest in precious stones.
“Lead ingots, gold, and others are stores of values, helping in mitigating the risk of losing savings during inflation,” Adedeji noted.
He added that investment in Treasury inflation-protected securities, government bonds, and stocks, among others would help to checkmate the effects of inflation.
Above all, he charged Nigerians to reduce unnecessary consumption and imbibe various cost-cutting techniques to have something to save.
According to Adedeji, it is only people who cut their daily costs that would have something to save in this time of hyperinflation.
“Reduce heavy usage of liquid fossil fuels and embrace Compressed Natural Gas or renewable energy,” he counselled.
In summary, protecting your savings from devaluation during high inflation requires strategic financial planning and diversification. Investing in real estate, precious metals, and commodities, along with maintaining interest-yielding savings accounts and holding some hard currency, can help preserve your money’s value. Additionally, reducing unnecessary expenses and adopting cost-effective alternatives like renewable energy can further strengthen your financial resilience. By implementing these strategies, you can not only safeguard your savings but also potentially grow your wealth, ensuring financial stability and security in uncertain economic times.