Sort out your savings
With the rate of inflation at 3.1% in September, most people’s savings are effectively losing value. The rubbish interest rates on offer will not keep up with the rising cost of living but you should still make sure you are getting as good a return as possible. “Your emergency fund should be in a competitive easy access account paying as much interest as possible,” says Sarah Coles from the financial firm Hargreaves Lansdown. “For cash you won’t need for another six months or longer, it’s worth considering tying it up for the most suitable periods in a fixed-rate account.”
If you have £1,000 or more in savings, you could earn 0.6% with Aldermore’s Double Access account. It pays that rate if you make up to two withdrawals a year – any more and it will only pay 0.1%. Locking the same sum away for five years could get you a rate of 2%. Those are much better rates than the 0.01% you might be earning if you haven’t shopped around recently.
Invest some of your savings
For money beyond your emergency fund, you may want to consider the stock market, which offers the potential for inflation-beating returns. Of course, it also comes with the risk of losing your money. Funds will help you spread the risk better than individual shares.
Dzmitry Lipski, the head of funds research at Interactive Investor, says the Capital Gearing investment trust is one to consider. It has two objectives: to preserve the money you invest over any 12-month period and deliver returns in excess of inflation over the longer term.
“With a multi-asset portfolio of bonds, equities and property, and small holdings in infrastructure, gold and cash, this is a good every-weather option,” he says.
The Climate Assets Fund from the investment firm Quilter Cheviot is another fund that Lipski says could beat inflation – it invests in businesses working on environmental technologies.
Trim any regular costs
If you are on a tight budget, any uptick in prices will put a further squeeze on your spending. Before you cut back, make sure you are getting the best deal on services you are paying for. Steve Webb, a partner at the financial consultancy LCP, suggests checking your phone contracts, home broadband and insurances. “There can’t be many people who couldn’t save in one of these areas,” he says. Energy would usually be on the list but for most people staying put is the best bet at the moment.
Webb says: “Go line by line through credit card statements and bank statements and make sure you know what every item is. You may well find ‘trial’ memberships that have suddenly become regularly monthly payments, etc that you never intended and could cut.”
Change what you buy
If your supermarket shop is costing more each…
Read More: How to inflation-proof your finances | Money