No matter how much you earn or how good the economy is, inflation is always impacting your daily life. The amount of money you have now is almost certainly going to buy less in the near future, even accounting for favorable global exchange rates. Unless your income increases significantly or your savings and investments manage to beat inflationary pressures, you’re eventually going to experience a crimping down of your lifestyle.
For many Filipinos, this slow decline of purchasing power feels especially frustrating. Thankfully, beating inflation doesn’t always require risky strategies or lucking into large sums of money. In fact, some of the most effective inflation-fighting habits involve simple, repeatable actions that help your money keep pace with rising costs.
With the right approach, even modest income earners can effectively protect their purchasing power, avoiding the steady erosion of their hard-earned wealth. Here are practical, easy-to-adopt steps that can help maintain your practical purchasing power over time.
1. Keep Your Cash in an Interest-Earning Savings Account
Letting money sit idle in a traditional bank account, or worse, under your mattress, will result in a serious loss of value. This cash will earn little or no interest, which means it effectively loses purchasing power just sitting there.
A smarter approach is to place everyday savings in a digital bank account that offers high interest savings Philippines-based depositors trust. Some modern savings platforms already offer interest comparable to or better than inflation. If you open a Maya deposit account, for instance, your money earns a base rate of 3% p.a., which can increase up to 15% p.a. when you use your Maya account for such things as paying bills or making online purchases. Putting your spare cash in these accounts is a no-brainer, since it preserves buying power without requiring big changes in your lifestyle.
2. Separate Savings From Spending Money
When all your funds mix together in one account, it requires extraordinary discipline to avoid using up more than you planned. Inflation already eats into your purchasing power, and risking unplanned spending can make it worse.
Maintaining a separate savings account creates a psychological and practical barrier that avoids this issue. Some digital banks like Maya even allow you to set up savings buckets or subaccounts within your main account, making the segregation process even easier. Through Maya Personal Goals, you can create up to 5 goal accounts or “envelopes” at a time, with each account earning a base rate of 4% p.a. You can boost this up to 8% p.a. when you reach certain milestones. Whatever the specific setup, money set aside for future needs stays untouched, giving it more time to earn interest and preserve value.
3. Lock Away Money You Don’t Need Right Away
Speaking of fund segregation, not all savings need to be immediately accessible. If you know certain funds won’t be used in the near future, placing them in a time deposit or similar product can help preserve or even increase value, without the risks associated with conventional investments.
Compared to typical savings accounts, time deposits typically offer higher returns. Also, because you won’t get the full benefits when you withdraw your money early, you’re more motivated to keep the cash where it is. Fortunately, some digital banks also allow top-ups and time deposits, making these especially attractive when you’re trying to maximize the impact of your long-term savings.
4. Make an Emergency Fund Your First Savings Priority
Once you start saving, your first goal has to be building a credible emergency fund, equivalent to roughly 3 to 6 months’ worth of typical home and personal expenses. Without this buffer, even small emergencies can force you into debt, deepening the total financial impacts of the sudden change. With more of your funds now tied up in debt servicing, you’ll find it harder to build a nest egg that’s sufficiently protected against inflation.
To help maintain its value over time, keep this emergency fund in an interest-earning account. Yes, the cash in an emergency fund might earn more in investments, but investments by themselves are usually less ideal for absorbing medical costs or temporary income disruptions. The idea is to always have enough liquidity to meet most challenges that come your way.
5. If You Must Buy Something, Buy Quality
There’s a place and time for cheap appliances, clothes, furniture, or even vehicles. However, if you’re replacing these every 2 to 5 years, that means you have to continuously dip into your funds, hampering their growth. Generally speaking, paying slightly more for better durability or repairability means that you end up with possessions that last a lifetime, which is a pretty good trade-off in the grand scheme of things.
Thankfully, pricey items are not your only option these days. There is now a healthy market for high-quality secondhand and out-of-season goods to meet your home and personal needs. With a bit of research, you can spot great buys that outmatch what you can get new.
As another benefit, diving into the details of what makes something “good quality” or not also turns you into an educated consumer, which means that, when you do buy something new, you’re better equipped to choose what will get better value for your money. Over the long haul, you’ll likely have more cash left over to strengthen the foundations of your wealth, without the negative quality-of-life impacts of frequent replacements.
6. Increase Savings Gradually as Income Grows
As your income grows, the amount you commit to savings (and later on, investments) should grow too, even if only slightly. These small increases help your various funds benefit from compounding interest, keeping them protected against rising costs. In the process, you’ll also avoid serious lifestyle inflation, a phenomenon that almost always hampers your ability to overcome long-term financial pressures.
Your Habits Can Outpace Rising Prices
Inflation may be unavoidable, but to a point, you can maintain purchasing power. When you weigh your buying decisions and choose savings tools that work harder for you, it’s possible to protect the value of your money and avoid many of the impacts of inflationary pressure. Take inflation into your wealth-creation calculus today, and your future self will undoubtedly thank you.