Inflation: what to do when it’s hard to save right now?

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Inflation obliges, the French and the French are struggling to put money aside. Due to the war in Ukraine, which is causing severe disruption in certain sectors of the global economy, and anti-covid policies practically during the health crisis, the whole world is now facing an almost uncontrollable rise in prices. … which tirelessly erodes savers’ ability to invest and the purchasing power of all taxpayers. Therefore, indicates the specialized site Best Rate, pessimism invites itself among the latter; especially when they do not benefit from strong incomes.

Many savings products among those that French people are most fond of, such as life insurance or Livret A for example, are now showing a negative real return. Concretely, this therefore means that savers are losing money due to inflation, estimated at 5.8% over one year at least from August 2022, recalls BFMTV. Does this mean that you urgently need to change your strategy and start transferring your savings now? The answer of Alexandre Delaigue, economist and associate professor of economics-management at the University of Lille 1.

“For the moment, it is undeniable, inflation is reducing the purchasing power of savings. Therefore, the best way to save money is to target activities that are not very affected by this phenomenon. Then, it seems important to me not to lose sight of the long-term dimension of savings. A number of investments will see their rates adapt gradually. They will not catch up with inflation right away, but eventually things should settle down, ”said the professor, who also taught at the Saint-Cyr Coëtquidan academy. He thinks in particular of LEP, the rate of which is almost equivalent to inflation today.

“The period, it is a fact, is going to be quite difficult. A general depletion of savings is to be expected and products whose return is based on fixed interest or on interest adjusted periodically on given dates will not be the most attractive. However, it is possible to invest your money elsewhere”, emphasizes Alexandre Delaigue.

“Some long-term products, such as equities, remain possible and attractive at this time. Business profitability depends on turnover, which follows inflation. Because the margins increase with the latter, the value of the shares should inevitably go up over time. It is also important to note that not all companies are equal, in that they are not all affected in the same way by the rise in prices”, continues the specialist, who mentions Total, whose “super-profits” are the subject of a thousand and one debates today, or Apple whose “pricing power” is significant.

“There is also real estate or real assets. In the case of the first, which must then constitute a long-term perspective, there is no reason for inflation to depreciate its value”, he continues.

A question remains, therefore: should we give up on the Livret A, the Livret de développement durable et solidaire or life insurance, whose real returns are no longer sufficient to counter inflation? Is it more relevant to stop feeding them to leave everything behind and buy a (new?) apartment? Not necessarily, believes Alexandre Delaigue.

“If you stop feeding your regulated savings account, you have to plan something else or invest that money. A current account or a safe would be a gross error: it is the assurance of further devaluing one’s savings. Of course, we can always say to ourselves that it would be daring to recover all our money to invest in an apartment, but we must not lose sight of the fact that such an operation has a cost… and that the game is probably not worth it. not the candle if the inflationary wave remains punctual”, explains the teacher, for whom the scenario of endemic inflation is to be ruled out.

“In the current state of things, it is better to take the shock, turn around and not give in to the siren song. It is not intelligent to embark on risky choices that one would probably not have made in normal times. Let inflation calm down, there is no need to think about long-term strategies yet,” he concludes.