Do you consider inflation when choosing to save?

[Bruce Wayne]

Inflation at the moment is pretty high, and in many cases might be wiping out the interest you'd make on savings. Do you consider this when saving/investing?

[gamecock43]

yes, well no. Yes i am aware that inflation kills my savings. But no, I save anyways. I consider saving a 'discipline' rather than a way to build wealth. Yes, savings will help, and does its job. But its the 'learning to save' and 'discipline' that you must learn during the saving process that really teaches me to build wealth.
That being said, I am aware that my 'house down payment' sitting in a money market account is earning $90 a month now as opposed to $200 a month from a few months ago...so now is the time to spend the money. Inflation makes it smarter to spend the money now in a long term investment like a house, than a shorter bank investment.
I hope that makes sense.

[Joan.of.the.Arch]

Yes, of course. Always, inflation has been a reason to do more now to provide for my future.

[MonkeyMama]

Agreed with Joan.

Any cash we have saved up has generally kept up with inflation. And it SURE beats paying interest on debt. (Cash just buys a certain freedom).

Likewise, we tend to keep most of our "savings" in more long-term investments like stock mutual funds. In general we save up enough cash to cover a rainy day and any near term purchases. The rest is more long-term, higher return investments. The bulk really - stocks.

I know I am young (30) but I realize these meager savings rates have not been the historical norm. Only since I have been a working adult. BUT likewise, I snatched up quite a few 5.5% - 6% CDs in the last couple of years as I watched the housing bubble bursting in my backyard. So my cash ain't doing so bad either. IT was a good gamble for me, and I have little to complain about for now, on my cash. Likewise, there are lots of rumblings of rising interest rates in the future (though who knows...)

[jIM_Ohio]

Yes- inflation is what I need to beat with my returns. That is why when I save, I do not save much to CASH and instead direct those investments to something which historically has kicked the @$$ of inflation (equities).

[disneysteve]

Inflation at the moment is pretty high

First off, I disagree with your premise. Inflation today is not "pretty high". It has ticked up a bit from a year or so ago, but it is still near the low end of historic rates.

As for how I account for it in my investing, I'm with Jim. I'm 43 and about 80% of our portfolio is in stocks where over the long-term, the return should far outpace inflation.

[Ima saver]

I have to have a lot of cash because we build houses for cash. As soon as things pick up, we will buy a lot and build another spec house. I try to find the highest interest rates that I can. I am getting 4% and up on much of my cash, but not all of it.

[Bruce Wayne]

First off, I disagree with your premise. Inflation today is not "pretty high". It has ticked up a bit from a year or so ago, but it is still near the low end of historic rates.

As for how I account for it in my investing, I'm with Jim. I'm 43 and about 80% of our portfolio is in stocks where over the long-term, the return should far outpace inflation.

Depends how you measure it doesn't it? Sure things like clothing and electricals have gone down recently but areas such as property, fuel and food have all gone up tremendously in the past few years. Oil prices alone have doubled in the past year.

[tripods68]

The beauty of anykind of Retirement Planning calculation the inflation rate (you select the %) is included when it "spits" out numbers. The key is finding your 'number' that you are comfortable based on your "risk tolerance" profile. Whatever that number ?? should drives your asset allocation model. This is where many people do not understand. For example, if you are risk averse, you tend to decrease your exposure to stocks. Instead you invest heavily weighted more towards bonds/cash combo. So your asset allocation would look like 40/50/10 (40% stocks, 50% bonds, and 10% cash), and/or vice versa. The point is, you shouldn't have to think about the "inflation rate" of today when it comes to long term investment. Your asset allocation already takes that information into account.

The hardest part of selecting asset allocation mix would be selecting the funds or stocks itself to invest in with so many factors to consider (i.e. fund performance, expense ratio, fees, or which stock to buy/hold/sell, etc). But you already know that




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[OverSaver]

just save long enough until inflation calms down...then it might level out again

[financialnut]

Of course I consider inflation- you have to! That's why I don't leave my extra cash in my checking account that gets a whopping .5% interest rate! If I continued to do that, I would be losing value on my cash each year...

So... long term, OF COURSE the best way to fight inflation is a good index fund. I guess it's pretty standard, right? Find a good index fund you're comfortable with, and if it's anything like what we've done for the last x-amount of years, you'll be beating up on inflation.

Other than that, you're stuck; unless, of course, you invest in various business ventures or real estate.

But, if you're like many of us, you don't have either any desire to get risky like that, or you don't have time to learn about it.

[rob62521]

We continue to save money and put it into a MM as well as look for CD's that pay a little better. Even if we aren't keeping up with the inflation rate, it's still wiser to save than to spend. Inflation goes up and down as do the interest rates. Hopefully it will all work out and readjust so we don't really look at the day to day stuff -- we are holding on for the long term results.