When considering the impact of inflation on savings and investments, it's important to understand how inflation erodes the purchasing power of money over time. Inflation refers to the general increase in prices of goods and services, which means that the same amount of money will buy fewer goods and services in the future.

For example, if inflation is running at 3% per year, an item that costs $100 today will cost $103 a year from now. This means that if your savings or investments are not growing at a rate that exceeds the inflation rate, the real value of your money is decreasing.

One way to mitigate the impact of inflation on savings is to invest in assets that have the potential to provide returns that outpace inflation. This could include investing in stocks, real estate, or other assets that historically have provided returns that exceed the rate of inflation.

Additionally, it's important to consider the impact of inflation when choosing savings and investment vehicles. For example, while traditional savings accounts may offer safety and liquidity, the interest rates they provide may not keep pace with inflation. On the other hand, investing in inflation-protected securities or diversified investment portfolios can help safeguard the purchasing power of savings and investments.

References:

• Investopedia - How to Protect Your Portfolio from Inflation
• The Balance - The Impact of Inflation on Investments