Inflation is killing your savings - what you must do to combat it

Multi award-winning Chartered Financial Planner, Certified Coach, author of The Money Plan, and Sunday Mirror columnist
The American economist Milton Friedman once said: 'Inflation is the one form of taxation that can be imposed without legislation.'
Yet for most people, it slips under the radar, affecting our spending power without us giving it a second thought. In recent years, inflation has made headlines more than usual, from the post-COVID stimulus surge to its gradual retreat.
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I first raised concerns about the risk of rising inflation over three years ago. To me, it felt inevitable. Professional investors and economists should not have been caught off guard by its rise. What was surprising, however, was just how far and how fast it went.
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Inflation is a normal part of the economy, and it shouldn't be feared. However, when it gains momentum, it can spiral out of control, leading to a rapid increase in prices. This is what we have recently experienced, which led to the cost-of-living crisis that affected everyone.
Inflation and its impact on wealth is often overlooked. I tell my clients that inflation is one of the biggest risks to their money. Why? Because inflation is effectively a constant tax on the value of your pounds and assets, a tax that we all collectively pay.
Consider this: since 1989 inflation has averaged around 3%, which to most people would seem modest. But this means you would need to achieve at least a 3% return on your cash savings and investments, after tax and costs, each and every year, to maintain the value of your money.
In other words, you need £189 today to buy the same goods which would have cost you £100 at the turn of the millennium, just because of inflation.
That's why I advise against keeping excessive amounts of money on deposit for prolonged periods of time. Inflation is like carbon monoxide to your money: it's a silent killer of wealth creation, of which few people are aware.
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So, what's the solution? The answer lies in investing rather than maintaining cash deposits (savings). The MSCI World index, which is a collection of the world 's largest companies in developed countries, has delivered 10.5% pa average return over the last 20 years for UK investors. Even after accounting for fees and tax, you'll comfortably stay ahead of inflation.
This is one reason why the wealthy get richer during inflationary times: they understand that companies can increase their prices and profits, which helps share values rise.
You too can participate and grow your wealth over the next 20 years, even if you start small, but you must start. Now, more than ever, it's crucial to focus on the importance of investing to combat the negative effects of inflation. The recent high inflation rates serve as a stark reminder of this necessity.

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Scottish Sun

3 hours ago

• Scottish Sun

I sold my £140k flat and started renting in my sixties – I save £12,000 a year and don't pay energy bills

We explain how to become a property guardian HOUSE THAT I sold my £140k flat and started renting in my sixties – I save £12,000 a year and don't pay energy bills Click to share on X/Twitter (Opens in new window) Click to share on Facebook (Opens in new window) HANDING the final paperwork to the conveyancing solicitor completing the sale of his £140,000 two-bedroom flat Ian Horton, feels a wave of relief. After months of stress, Ian is swapping home ownership for renting as a property guardian at the age of 61 to beat the high cost of living and save for his impending retirement. Sign up for Scottish Sun newsletter Sign up 6 Ian Horton sold his flat at the age of 61 to beat the high cost of living Credit: Ian Horton 6 He now rents a room in a pub Credit: Ian Horton 6 It's allowed him to cut his bills and save for retirement Credit: Ian Horton 6 The pub is awaiting redevelopment and is located within London's commuter belt Credit: Ian Horton 'I sold my flat due to Covid and skyrocketing energy costs,' Ian said. 'If I kept the flat, I'd face a debt crisis caused by rising electricity, fuel, and household bills.' Now Ian is renting as a property guardian living in a pub in London's commuter belt. He pays just £350 a month including electricity, water and council tax, saving £1,000 a month, or £12,000 a year compared to owning his own home. 'It's a miracle cure for OAPs battling the cost of living,' Ian said. 'I could never have done that if I hadn't sold my two-bed flat in my sixties. 'It may sound bonkers but becoming a property guardian is the best financial decision I ever made.' Self-employed courier Ian lives behind the bar in the former hotel in Bedford, Bedfordshire - an hour and a half outside of London with his partner Maureen, 61. The retired admin staffer and Ian pay £350 each as part of their property guardian rent. The German village where yearly rent costs less than £1 They're among 10,000 people in Britain who have become property guardians due to the rising cost of living, the rental crisis and property shortages. Property guardians live in an empty building or part of a building that would otherwise be empty to ensure it is not broken into and safeguarded. In return, guardians like Ian get to rent the property at up to 70% below its market value often with the cost of gas, electric, water and council tax included. When Ian first heard about the scheme through a friend, he knew it was the 'miracle cure' he needed to be able to cut costs and save for retirement. Ian said: 'I know people will say selling a property at my age to start renting again is crazy at my age. 'I discovered it's not bonkers but bankable because being a property guardian actually covers your costs and allows you to rent amazing properties at a tiny fraction of market value. 'It made the decision to sell my two-bed first floor flat so much easier,' he said. The self-employed courier and former postie bought his two-bedroom leasehold flat in Dunstable, Bedfordshire, in 2006 for £100,000. 'Like most people my age I was told buying was critical to retirement. 'But when the lockdown hit and energy prices and food costs started skyrocketing, I knew I had to find a solution to making the money I earned stretch further if I ever was to retire.' Ian admits he was terrified about skyrocketing gas and electric prices. As a courier Ian was also hit with escalating fuel costs. How Ian's costs changed after becoming a guardian WHEN Ian sold his flat in 2022, he was paying £300 a month for his mortgage, £50 for electricity, £30 for water and his council tax was £100 with a single person's discount. Ian also had to stump up £100 a month leasehold fee for his flat and budget another £50 a month for extra leasehold fees including roofing and emergency funds. His other monthly fees include Wi-Fi at £25 a month, phone bill of £30, groceries cost £150 and fuel was more than £300. Plus, he was paying property and vehicle insurance costs of over £200 a month, £100 for repairs and £100 in parking costs. In total, Ian was faced with monthly costs of almost £1,900 a month. After moving to the pub, he pays £900 a month including all living costs, fuel, insurance on his van and accommodation. Ian's new home As Ian completed the £140,000 sale of his two-bedroom flat in 2022, he also applied to be a property guardian. He signed up with Live in Guardians, which works with property owners and potential guardians to find the right property for the right person. 'I filled out a questionnaire, provided my renting history, exchanged questions and was acccepted,' Ian said. 'It was like applying to rent a property. I didn't need any special skills. 'The fact I was older, had owned property and was dependable was a big bonus for me. 'Once I was approved to be a guardian on their books, I got to apply for the range of properties they had on offer,' he says. His new home is a pub earmarked for redevelopment, but Ian can live there until redevelopment begins which isn't expected for at least two years. Ian said: 'Live in Guardians can find me a new property whenever I want. 'They have properties all over the country from old fire stations to former nursing homes, pubs, posh houses and form office blocks available as a place to call home.' The traditional British pub with the familiar white facade, dark brick tints and red door has leaded glass windows, an original bar, wood floors and fireplaces. There are four rooms available to rent, but Ian said they don't always see the other guardians. Included in Ian's rent is the gas, electric, heating, water, council tax, insurances, parking costs and hotel repairs. Ian and Maureen have got their own Wi-Fi for £35 a month, but they share a big kitchen and bathroom and separate toilets. In return for the cheap rent, Ian keeps Live in Guardians informed of any repairs which need doing until developers begin their work. Ian said: 'The energy bills are thrown in. I can enjoy a long shower and turn on the food whenever I want. 'It's a huge relief to not worry about the electric or gas bill. 'Before I was a property guardian, the cost of living meant I had to stop making monthly private pension payments so that on top of my government pension means I can have a little extra. 'It's not a huge amount but just being able to make monthly payments means I can breathe again. 'The fear of monthly bills has gone, and I can budget sensibly. 'I don't know when I will retire. I know it's years off. 'I do know when I finally stop working it will be possible thanks to living locally at 'my local.' Live in Guardians says it has 700 guardians currently in properties, although it has 32,500 in its database alongside £500million worth of property. Property terms can range from three months to seven years. Arthur Duke, its managing director, said: 'People are seeking out new and affordable places to live. 'We also have more companies than ever before wanting us to provide live in property guardians to stop their empty properties being scattered in, vandalised or not properly being cared for, Property guardianship agencies say the scheme allows businesspeople to pay reduced insurance and maintenance costs, generate an income on the empty premises, diversify its portfolio, and ensure the properties are well cared for. How to become a property guardian First research the different property guardian agencies. It's also important to know you're not a tenant. Instead you're a licensee which can mean fewer rights, and that it's easier to be evicted. You'll need to be over 18 years old, while some agencies prefer over 21. You'll need to be employed, self-employed or a student with income. Families are not suitable but single people or couples are accepted - but in some cases guests or pets aren't allowed. Then simply apply online via the guardian agency website - you'll need to provide ID documents, proof of income/employment and sometimes references. You might also need to attend an interview or information session. If accepted, you'll be offered viewings of available properties - most are advertised on the agency's websites. You should be prepared to move quickly if a place becomes available — unusual properties go fast. Once moved in, simply keep the agency updated on any concerns and issues with the building. How to choose a guardian agency Make sure the company is a member of the Property Guardian Providers Association (PGPA) or has good reviews. Here are some of the more established agencies: Live-in Guardians - Property Guardian Protection - Dot Dot Dot - Global Guardians - Lowe - Blue Door Property Guardians - Ad Hoc - 6 Ian and the other property guardians share a kitchen Credit: Ian Horton 6 They also have a communal bathroom but have individual toilets Credit: Ian Horton Do you have a money problem that needs sorting? Get in touch by emailing money-sm@ Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories

Spectator

7 hours ago

• Spectator

Is Dutch tolerance dying?

Campaigners across southern Europe are protesting against 'touristification'. Meanwhile, in the Netherlands, wealthy expats are in the firing line. Businesses in Amsterdam could be asked to foot the bill for local housing if they employ highly-skilled internationals. Alongside paranoia about asylum seekers, there is a rising feeling that expats and even holidaymakers are unwelcome in parts of the continent. The Netherlands was once an outward-looking, tolerant, trader nation. Is that still the case? It's not much fun to live in a place – or even visit somewhere – that resents your presence, especially if you have bothered to learn the local language and swallowed the high tax rates that fund northern Europe's generous social benefits. But this 'me-first' sentiment in Europe is great news for London and anywhere else in the market for scarce global talent. Post-Brexit 'trading volumes shifting to Amsterdam appear to be here to stay,' Dutch financial paper Het Financieele Dagblad jubilantly announced earlier this year. The paper claimed that 'Amsterdam is now bigger than London'. In the aftermath of Britain's departure from the EU, there certainly appeared to be some evidence that London's dominance as a global financial centre might be at risk. But – unlike the years after the 2016 EU referendum, in which the European Medicines Agency relocated to Amsterdam, and the Netherlands Foreign Investment Agency loudly boasted about winning businesses, jobs and investments – there has been a change of tone. The Netherlands was once an outward-looking, tolerant, trader nation that advertised for foreign students and was proud of its English-language proficiency. Is that still the case? Last week, Amsterdam council voted to pass a motion to ask international businesses based in the Dutch capital to contribute to solving a general housing shortage and pay for programmes to get their 'lonely' foreign workers to integrate. The policy, 'Make Amsterdam your home', sounded friendly enough, but the message behind it was anything but. 'In short, internationalisation is part of our city but it also brings challenges, such as driving up house prices, the emergence of a parallel world and the transformation of neighbourhoods, for example because more and more English is spoken,' it declared. Foreign companies, said the accompanying Labour press release, should be expected to give something back. As the Netherlands remembers 80 years of liberation from the Nazis – thanks to Allied troops, speaking that awful language of English – foreigners are being blamed for driving up house prices and sabotaging social cohesion. The facts are less important than nationalist gut feeling: the Dutch government offers 110,000 highly-skilled migrants (including footballers) a temporary tax break to compensate for its high income taxes. But despite the expats, who don't even have a vote, benefitting our country, they are far from popular. It doesn't seem to matter that a government analysis found the tax break raises €128.5million (£110 million) a year, has a 'very modest impact' on house prices and 97 per cent of the highly-skilled professionals work full time, compared with 52 per cent of the Dutch. Nor that Statistics Netherlands research suggests that Germans and Brits lead the least segregated lives and wealthy locals the most. The Dutch government recently collapsed in a row over asylum created by far-right veteran Geert Wilders. Universities are scrapping English-language courses and capping international student numbers. Now, Amsterdam councillors are pointing the finger at internationals for the consequences of the Netherlands' part-time lifestyle, lack of house-building and preference for single-person households. Meanwhile, the country continues to ignore calls from the European Commission, Dutch central bank and its own economists to reduce home owner tax breaks that inflate its housing market. It's easy – if absurd – to vilify other people and treat hard-working foreigners who do the jobs you can't or won't do as 'exploiting' your system. But the result is obvious: when places like the Netherlands become hostile to international business and talent, it will go elsewhere. The failure of Dutch tolerance is a marvellous opportunity, in other words, for a place like London – where you can be judged by what you can do instead of by your name; where a finance minister doesn't have to admit the tax office has a problem with 'institutional racism'; and a government doesn't fall after falsely accusing some 40,000 families of childcare benefits fraud. Non-doms might not be welcome in the UK – and Wise, the British fintech, might be leaving for New York – but filthy-rich talent is not a problem in London. Some Dutch experts, at least, recognise that their golden age is tarnishing. To the concern of the Confederation of Netherlands Industry and Employers (VNO-NCW), the country dropped from 4th in 2021 to 10th this year in the IMD's world competitiveness ranking. The Netherlands might be ahead of the UK (29th) with the help of its international trade, but tax policy is rated a dismal 67th – well under Britain. The general-director of the VNO-NCW Focco Vijselaar tells The Spectator that there is cause for concern. 'For quite some time, we have been pointing out the concrete rot in our business climate,' he said. 'And you see the cracks in these kinds of lists. If you look at international investment, we are at 41st place, an unprecedentedly low spot. We are struggling with major bottlenecks in the Netherlands: a housing market that is locked down, nitrogen pollution problems and high energy prices.' Flip-flopping on highly-skilled migrant tax breaks does not help, he added: 'We need the expats.' Liberal democrats in Amsterdam are also worried about scapegoating the international community. 'That social cohesion is under pressure is not solely due to the expats,' said Democrats 66 economics spokesman Erik Schmit last week. 'Housing prices are rising: it is not proven that this is solely due to the international community…As a government, we have other priorities.' But after constant changes to the 30 per cent highly skilled migrant tax-free allowance and the removal of its non-dom ruling, the Netherlands is increasingly out of favour. New foreign student numbers have plunged, threatening various courses. Data from jobs site Indeed shows a drop of 48 per cent in applications from India and 40 per cent from the UK this year. Emigration appears to have peaked and highly-skilled migrant numbers are tumbling. Britain might have creaking infrastructure and complex regulation, but it is remarkably open and far less corrupt than many of its neighbours. If the Dutch want to drive out innovators, talent and factories with high energy prices, punitive taxes and cultural suspicion – and if southern Europe is busy fighting with tourists – other cities have a chance. Now is the time to declare Britain open for business.

Powys County Times

11 hours ago

• Powys County Times

Creative industries to get £380m boost ahead of industrial strategy launch

Britain's film, music and video game industries are set to receive millions of pounds of investment as the Government seeks to ensure the UK's place as a creative superpower. The investment, announced by Culture Secretary Lisa Nandy, will see £380 million spent on a range of projects intended to double private investment in the creative industries. Ms Nandy said the investment would 'boost regional growth, stimulate private investment, and create thousands more high-quality jobs'. The figure includes £25 million for research into cutting-edge technologies such as the virtual avatars used in Abba Voyage, and £75 million to support the film industry. It will also see £30 million put towards backing start-up video games companies – an industry worth billions of pounds to the UK – and another £30 million for the music industry, including an increase in funding for grassroots venues. Another £150 million will be split between the mayors of Manchester, Liverpool, the West Midlands, West Yorkshire, the North East and the West of England to support creative businesses in their regions. The announcement comes as the Government prepares to publish its industrial strategy next week, billed as a 10-year, multibillion-pound plan to back certain sectors and secure growth for the UK economy. The creative industries are set to be one of the winners, with a plan for the sector expected to be published alongside the wider industrial strategy. Business Secretary Jonathan Reynolds said: 'The UK's creative industries are world-leading and have a huge cultural impact globally, which is why we're championing them at home and abroad as a key growth sector in our modern industrial strategy.' But earlier this month, the Government also rejected a planning application for a major new film studio near Holyport, in Berkshire, over its impact on the green belt. The £380 million has been welcomed by the industry, with the Broadcasting, Entertainment, Communications and Theatre Union (Bectu) saying it was a 'show of commitment to the sector'. But Bectu chief Philippa Childs said creative workers would also be looking for 'sustained support' from the Government as the sector 'recovers from a series of external shocks'. Recent years have seen the sector rocked by Covid, the cost-of-living crisis and concerns about the impact of AI and Donald Trump's threat to impose tariffs on films made outside the US. Conservative shadow culture secretary Stuart Andrew accused Labour of threatening the 'very survival' of the creative industries. He said: 'From their national insurance jobs tax to their business rates hike, Labour are pushing creative businesses to the brink, and we now know that Rachel Reeves has a secret plan to raise taxes – meaning things will only get worse. 'Labour must recognise that their economic mismanagement is dealing a devasting blow to the sector.'