Inflation also affects your Savings Account

We all know the negative effects generated by the inflation rate, even in a small part. Have you noticed that the money is not enough to make purchases with ease? Your purchasing power is affected by inflation, know-how.

In inflation scenarios, any product or service raises its cost in a few days as if several months had elapsed. That is, there is an accelerated price update, becoming so expensive that it affects our daily lives.

What is the CPI?


Specifically, on the issue of inflation in Mexico, the CPI (Consumer Price Index) is taken into account. It is a variable that shows the level of inflation. This price variation also applies to the basic basket. In Mexico, there is a current annual CPI inflation rate of 4.37%. Counting from January 2018 to January 2019, which indicates the presence of an increase of 0.09%

This situation not only affects your pocket since your perceived earnings are not enough to settle debts, pay for services, buy food, cover the university, enjoy and buy what you want and even save. Did you know that inflation in Mexico has the capacity to affect your savings account? How is this possible? If inflation and savings account are about and for a better understanding, you can calculate how much money you have lost based on the CPI.

By having a certain amount of money in your savings account, it will be reduced as the CPI increases. If this variable does not change its course or does not slow down, you could be left without a peso in the bank, this means that your income must be greater than the inflation per month.

How does inflation work with respect to your savings account?

How does inflation work with respect to your savings account?

People generally think that inflation will not affect you, if you have a savings account designed to save money and that it does not generate as many interests. This is absolutely wrong. Inflation touches all material good, any service or product of any kind and is not safe from being reduced.

Thus, inflation subtracts money from your savings account, but how does this happen? Let’s look at this simple example for a better explanation:

Suppose you have saved $ 150,000 pesos in your account and as indicated earlier, this year’s inflation in Mexico registered an increase in the CPI of 4.37%. A loss of 4.37% would be generated on those $ 150,000 pesos saved, which means that you would subtract that percentage from all your bank savings.

In summary, the calculation would be as follows:

150,000 – 4.37% = 6,555

Imagine that someone stole this amount from your savings account, now you would actually have $ 143,445 pesos, nothing encouraging and even a little sad. Nominally, you have the same amount of money, but its value is less since when you spend it you will see how it will pay you less.

This occurs because all prices have increased in order to adapt to the current situation, which is generally not noticeable except at the time of a considerable increase. However, the correct thing is to keep inflation in Mexico at low percentage levels.

In addition, in inflationary situations, banks could increase the cost for their financial services, from online banking to various commissions, and this would also affect your savings account economically.

Now how do you think inflation and your savings affect your pocket? Obviously, inflation devours your income, but not being so high, you may not notice the damage it causes them and therefore directly affect your savings.

This inflation trend is due to many factors, such as, for example, the poor management of the government, the imbalances between supply and demand, causing the rise in market costs, can be fiscal, monetary, among others. Another factor would be the propagation that causes these tendencies to be replicated towards other kinds of markets in the country, the price remarking is a clear example of this event.


Inflation and mattress effect

Inflation and mattress effect

Many people decide to withdraw all or much of the money from their savings accounts to move it home and place it under the mattress. This practice seems to be safer than having the financial support that is charging services for maintenance and others.

However, it is not the most recommended, since you place yourself in a high-risk situation. You could easily be a victim of theft or in case of a fire, you would lose everything. The worst, inflation will continue to detract from your savings and you will not be receiving any profit from the bank.

In addition, the bank is responsible for generating financial movements with money from savers, boosting the economy and providing greater protection to its customers.

Protect your assets and always look for responsible, honest and functional ways and methods to increase your capital. If you have the possibility, invest in assets that generate profits greater than the percentage of inflation in Mexico. Do not get rid of your real estate, selling them. Better rent them and use the money for repairs and improvements.

Use your credit cards instead of debit, but always pay on time to avoid bank penalties. The work of your hands is also part of the solution to the economy of the country and to this monster called inflation.

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