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How To Protect Your Wealth From Inflation


In recent times, there’s been a sustained rise in the price of many essential products and services. Some of the steepest climbs have happened with food items. But goods from every aspect of the average Nigerian’s life have become more expensive.

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Economists call this phenomenon inflation.

Inflation Explained

Sometimes (but not always) inflation is a sign that an economy is experiencing strong growth. But when it’s ‘too high’, it can cause a lot of problems, including an increase in the cost of products and services.

Inflation also reduces your purchasing power. That’s because it costs more money to buy things than it used to. If your disposable income doesn’t rise proportionate to price increases, you may struggle to buy things that you could afford in the past.

If you hold most of your wealth in cash, inflation will make it less valuable in real terms over time. The ₦500,000 in your bank account could be worth only half that amount in six years, by today’s standards.

How do you protect your wealth from the devaluing rampage of inflation?

Ways To Keep Your Wealth Safe From Inflation

Here are five ways to protect yourself from inflation.

Adjust Your Cash Holdings

As we have pointed out, continuous price increases make cashless valuable. Naturally, this will make you want to keep less of your wealth as cash in a bank.

But this isn’t necessarily the right strategy for everyone. It all depends on how big your emergency fund should be.

If you’re holding more than six months’ worth of expenses as cash (the recommended size for an emergency fund), you may consider converting some of the extras into non-cash assets. But if your cash reserves aren’t that big, you should keep adding to them.

You may have to adjust your emergency cash holdings upwards over time, to make up for the value that inflation erodes. Just be sure to invest what’s left in assets that yield significant returns.

Invest In Real Estate

One asset class with historically high returns is real estate. Whether it’s undeveloped land or rental property, it’s capable of preserving and even expanding your wealth despite inflation.

It’s not unusual to see double-digit yields for investments in this sector. Also, property owners can adjust rent and property prices upward to reflect current market prices (thus tracking inflation).

You don’t have to be wealthy to invest in real estate. You may begin by flipping inexpensive land and expand your involvement in the industry over time. Here’s our article on where to find the cheapest lands in Nigeria.

Use High Yield Savings Accounts

Regular savings accounts won’t protect you from inflation. That’s because they don’t pay a high enough interest rate on your savings.

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But you can keep your money with high-interest savings accounts. This service is typically offered by digital banks and savings platforms. Because they incur lower operating expenses than traditional banks, they are able to share a higher percentage of their ROI with users.

Buy Solid Stocks

The stock market could give you returns that beat inflation over the long term—if you invest in the right stocks.

Note that stock prices are typically unstable. They rise and fall all the time. But in the long term, they trend upwards. If you buy shares in the top-performing companies, you could reap a big return from them.

Not all stocks will guarantee you this. That’s why you need to research the company you intend to invest in before buying a stake in them. There’s a video explaining how to do this here.

These days, some apps enable you to purchase stocks on your mobile phone. One is the MeriTrade app, which lets you trade on the Nigerian Stock Exchange. There are also platforms for buying foreign stocks.

Increase Your Earning Power

You can beat inflation by increasing your income. And you can increase your income by improving your skills and acquiring new ones. You may put these skills to use at your current job or side hustle, and make more money.

Thankfully, there’s an abundance of opportunities for improving your skills, both online and offline. A lot of them can be accessed for free.

Final Words

If you want to preserve the value of your wealth, you have to overcome the challenge that inflation poses. You can do this with the five tips we have discussed here.

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Ikenna Nwachukwu holds a bachelor's degree in Economics from the University of Nigeria, Nsukka. He loves to look at the world through multiple lenses- economic, political, religious and philosophical- and to write about what he observes in a witty, yet reflective style.

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