Savings in times of inflation, false good idea?

Savings in times of inflation, false good idea?

#Savings #times #inflation #false #good #idea

This will not have escaped any consumer, in this year 2022 prices are rising. France is experiencing record inflation for decades, with an annual rate of 4.8% at the end of April. A rise in prices with multiple consequences: lower purchasing power, lower household consumption and unfavorable savings conditions.

“Inflation periods are always negative for savings,” says François Geerolf, economics professor and investment specialist. The logic is simple to understand: take for example booklet A, by far the most widely distributed with 55 million people. Currently, the famous brochure offers an annual profit of 1%. You don’t need to have done super math to understand that betting money reduces your purchasing power against inflation by 4.8 points. “Most interest rates are currently negative”, confirms the professor, because you know as well as we do, there are few bank books with 5% interest, alas!

Save against all odds

The best sign for everyone to empty their bank accounts and spend lavishly, fuck for fuck? “Although it may seem counterintuitive, even counterproductive, the French save a lot in times of inflation,” contradicts Philippe Crevel, director of the Cercle de l’épargne. In the midst of economic uncertainty about the future, as is currently the case, “we abandon apothecary and profitability calculations and put aside the money just in case,” continues the expert. The French continue to save more than 20% of their gross disposable income according to INSEE, a peak reached during the coronavirus crisis but which has not dropped since, despite government invitations to consumption and inflation. In the first quarter of 2022, an additional 12.2 billion was placed in livret A, while 40% of French people have life insurance.

This phenomenon, however, may have a certain logic, beyond fear. Olivier Rull, co-founder of Caravel, a platform for ethical and solidarity savings plans, says: “In times of inflation, not investing means losing purchasing power. Therefore, it is healthy for the French to invest their money, the question is rather to know where”.

Beware of bad investments

Because in such situations, good investments are rare. And beware of false good ideas: “Corporate stocks in particular, and in particular the CAC40, being in bad shape and falling, do not necessarily represent wise investments,” says François Geerolf. A tip from Philippe Crevel: “If you really want to invest, you should look for dividend stocks to maximize your chances of having a positive impact. »

In addition to stocks, the other false good idea would be to bet on material and real values, such as gold, for example. Caution “Many households adopted this strategy during the oil crisis of the 1980s, recalls Philippe Crevel. But without result: it was necessary to wait more than 20 years for gold to recover its level. Not really the most relevant location.

Real estate remains. The logic is simple: the rental price will increase as inflation and, therefore, will follow the rise in prices. A good investment to make? Not so fast. “It is possible, even probable, that the State decides to freeze the price of rents, or at least stop their increase”, warns François Geerolf. So be suspicious.

On the utility of saving

Unreliable solutions that partly explain why the French continue to save, despite deficit savings in terms of purchasing power: negative savings, but sometimes chosen for lack of anything better. “Even if it increases less than inflation, saving at least allows these incomes to grow a little. This may be necessary for future purchases”, acknowledges Philippe Crevel. Another option: keep your money aside for a while, hoping prices will go down. But there again, the bet is risky. “If wages rise to offset inflation, they won’t go down and prices will also stay high,” warns François Geerolf. In other words: at least part of the prices will not go down.

Not to mention that nothing says that inflation is going to stop in the short term: “The different financial markets rather expect a rise in prices for a few years,” says the economics professor. Consequently: save yes, but feel free to spend your money too. Olivier Rull advises dividing income as follows: 50% compulsory expenses (rent, food, bill), 30% “accessory” expenses (restaurant, cinema, etc.) and 20% savings and investment. Or the four-fifths of our money that we give directly to him.

Leave a Comment

Your email address will not be published. Required fields are marked *