Money Talks: Protect Savings from Inflation
Thu, 15 Apr 2010 14:35:09 GMT —
Question: How is a blimp like our economy?
Answer: They both require inflation to function properly.
Our economy works best with gradually rising prices.
But you've got government deficits that are really starting to balloon and a lot of people are afraid of runaway inflation.
And that could destroy the purchasing power of your savings.
So what's an investor to do?
Put some savings into investments that help fight inflation.
Here are some examples.
Over time, they've beaten inflation, but they obviously have risk.
Still, it's an option for part of your savings.
Gold is often touted as an inflation hedge.
But again, a risky one.
Much safer are I-Bonds.
These risk-free government bonds pay a fixed interest rate, plus an inflation kicker.
So you're guaranteed to beat inflation.
Treasury Inflation Protected Securities, or TIPS, are another type of government bond designed to beat inflation.
But like I-Bonds, lousy interest, at least for now.
And last but not least, the simplest thing you can do: shop your savings rates.
Some banks pay 10 times what others do, and shopping online takes seconds.
If you're going to invest in the long-term, you really need to keep your eye on the big picture.
That means developing strategies to protect your investments from things like inflation.