What inflation really means for your wallet

Ever wondered why your PHP 500 is buying you fewer groceries each time? Does it feel like you can buy less and less, even if you’re earning the same amount of money?

That’s because of inflation.

Inflation is the rate at which prices of goods and services increase over time. This plays a role in your purchasing power, or how much you can buy with your money. As inflation increases, your purchasing power goes down. This means that the number of items you could buy with a certain amount of money decreases as inflation goes up.

There are many causes of inflation, but in its simplest form, inflation occurs when there is a massive difference between supply and demand. For example, when the demand for onions goes up, sellers have to increase their prices because there is a very limited supply. Or, say, for example, the cost of face masks. When production costs increase because of more demand, prices will also go up to meet the massive need. When prices rise, wages need to rise too, to maintain workers’ living costs.

This push-and-pull effect contributes to inflation, and you’re feeling its effects every day.

Thankfully, however, there are ways to make inflation less scary and more manageable for you. The first, and most important step is to start saving and planning a monthly budget. Doing these little steps ensures that even if prices increase, you still have enough money to get you through unexpected events.

You can also consider placing your money in high-interest bearing accounts like time deposits. A time deposit is like a savings account which earns interest every year. Time deposits, however, earn more interest because it requires you to leave your money for a period of time, say, 5 years. If you withdraw it before this set period, you will be charged a fee. So, it’s best to keep it there.

Now that you’ve learned these skills, it’s a good idea to speak with an investment professional about setting up an investment portfolio. Investing is one of the best ways to beat inflation. Check out our articles and stories on investments to learn more about it.