It’s an incredible shrinking world!
This article is for information only and no recommendation is being made or should be construed from the contents of the article. Always seek independent financial advice prior to taking any action.
It was two fingers from Cadburys when they reduced the weight of their Chocolate Fingers packs in 2015 and official figures show a whopping 2,500 products have shrunk in size but not in price since 2012!
Labelled as “shrinkflation” by the Office for National Statistics, their research shows products from chocolate bars to toilet rolls have all got sneakily smaller, giving us less for our money than before.
While smaller Crème Eggs, Toblerones and Dairy Milk bars may be a bitter truth to swallow, what’s really hard to stomach is how much your savings will have shrunk if you’re banking on a bank to look after them.
Just like some of our favourite foods, banks have shrunk what they give us by reducing interest rates in recent years, to the point where what we get falls short of the rate of inflation. This means, in terms of what your money is worth, your savings are actually shrinking!
While it’s a good idea to have cash you can access immediately in an emergency, many people just don’t realise that relying on bank savings accounts and cash ISAs comes at a cost, particularly if you plan to keep your savings there for three years or more.
How to beat savings shrinkflation
While there’s no guaranteed way of beating inflation, many savvy savers opt to put their money to work by investing it in stocks and shares. For example, if your savings had been invested in a fund that tracks the performance of the top 250 companies in the UK on the FTSE stock exchange over the past five years, you’d be enjoying capital growth of more than 96%.
Investing in stocks and shares is about making a trade-off. You give up the security of holding cash in the bank in the hope that your money will grow faster.
Some investments are more secure than others and it is possible to choose options that minimise your risk exposure but this does mean that you also lower your potential returns. It all comes down to your appetite for risk and your capacity for loss.
For those who are prepared to trade off the potential risk against potentially higher returns, a product with a higher proportion of equities could be right for you. Saving in this way can be really simple and doesn’t require any specialist financial know-how. Using a service such as our Online Investment tool is a great way to find the right investment product with the right level of risk and reward for you.