Friday, September 29, 2023

This is exactly the money you should keep in your checking account to fight inflation

Although inflation remains on a downward trend, the rise in underlying inflation means that citizens are still oblivious to the fall in prices and continue to observe how their purchasing power continues to decline and the “basket of goods” becomes an element of ever higher costs.

Currently, inflation is at 5.7% (a far cry from the double digits it reached in mid-2022), but citizens’ Achilles heel is underlying inflation, which does not include energy products and unprocessed food. And it is already at 7% and food prices rose by 15% last December.

Therefore, inflation continues to be a major problem for citizens who hope that the government’s reduction in VAT on basic goods will have an impact on the “shopping basket”. But in the meantime, citizens can look for an outlet to combat inflation.

It is possible to combat the negative effects of inflation by using the money you have in a bank account more effectively. The reason for this is that the money stored there gradually and seemingly irretrievably loses its acquired value.

How inflation affects the money in your checking account

The best way to understand it is small amounts. At the beginning of 2022 it would still be possible to buy a liter of milk with one euro and citizens would still have a few cents left, but currently the euro may not even be enough for the same purchase. This is a clear loss of purchasing power.

This loss increases the larger the quantity. And the fact is that although it is normal to save money in your current account and leave it there, in most cases this is not rewarded with interest and therefore this avoidable loss of purchasing power occurs or at least alleviates it.

How much money should remain in the cash account due to inflation?

The key is to have a certain amount of money in your bank account and no more. According to the information published by the OCU (Organization of Consumer Users) on its website, this amount is said to be equivalent to about three months’ salary, which can be used for emergencies or unexpected expenses, as well as for ongoing day-to-day expenses.

The rest of the money must be withdrawn from the account because inflation is a so-called “silent enemy” that reduces the value of the money saved. Of course, when you withdraw the money you have to consider what you want to do with it.

How to fight inflation with checking account money

The premise is what many people refer to as “making money work.” This can be done in different ways, but always depending on the period of time during which the citizen can do without the money:

-In the event that the citizen can do without the money in a short period of time, the OCU opts for deposits with a term of one year. Of course, in order for it to be profitable, you have to wait all the time and not withdraw the money early, since in this case the imposition of penalties is very likely.

-If the citizen can do without the money for a longer period of time, the OCU recommends opting for financial products with a term of between five and ten years, in which very specific periods of loss have to be dealt with, but in which they achieved significant returns.

In any case, explains the OCU, it is fundamental not to leave more than 100,000 euros in each bank. The reason for this is that it is the monetary limit that covers the deposit insurance fund.

Nation World News Desk
Nation World News Desk
Nation World News is the fastest emerging news website covering all the latest news, world’s top stories, science news entertainment sports cricket’s latest discoveries, new technology gadgets, politics news, and more.
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