Is it worth saving if less than CPI or RPI?

pph

Hi: CPI annual inflation – the Government’s target measure – was 3.1 per cent in July, down from 3.2 per cent in June. RPI inflation is 4.8%.



Simply put, is any interest rate (AER) less than CPI is going to mean I am losing money?

There certainly aren't any good saving schemes about for a lump sum up to 4.8% if you think I should look at RPI!

http://www.statistics.gov.uk/cci/nugget.asp?id=19

CLAPTON

pph wrote: »

Hi: CPI annual inflation – the Government’s target measure – was 3.1 per cent in July, down from 3.2 per cent in June. RPI inflation is 4.8%.



Simply put, is any interest rate (AER) less than CPI is going to mean I am losing money?

There certainly aren't any good saving schemes about for a lump sum up to 4.8% if you think I should look at RPI!

http://www.statistics.gov.uk/cci/nugget.asp?id=19

compared to what?
spending
investing
giving it away

rrf494g

I would say that there's no point in spending money on something you don't need. That way you lose 100%. If you save then yes, in a sense, you may "lose" a couple of percent over a year.

xrjtg

It's about the personal value of the money to you at different points in time. If there's nothing that you want to buy now then, even if you'll be able to buy less in a year's time, you can still be better off by holding on to the cash.


The general inflation rate is a background which we have little control over. You need to find the best position for you relative to that background.

(Essentially the same comment applies to all investment activity.)

edinburgher

Depends:-

Do you have any debts?
Do you have an emergency fund?
Do you need to spend the money?

I get somewhat tired of hearing people talk about inflation as if it was some horrendous monster that eats savings Granted, for people on fixed incomes/folk with very large cash savings, it's problematic. For the 'average' person on the street, with an emergency fund, some cash in ISAs etc., it's hardly the end of the world. I only see inflation as being a real issue when you don't have any means of replacing any money lost to it (i.e. a job).

pph

Hi:

-no debts
-it's for a mortgage deposit (6-12 months from now?)
-ISA allowance used
-Got a job
-Am using regular saver accounts

Looks like for a large lump sum that I want to have access to if I need it is going to be losing money :[

beecher2

I don't see what alternative you have to saving, and if it is for a mortgage deposit, the only figures that matter to you is how much more or less expensive house prices and mortgage rates are when you come to purchase.

edit: would you have thought the same if your savings were getting more than CPI/RPI but house prices were escalating far quicker? Plenty of people did this for many years - they're the ones who have lost out I'd say.

pph

Good points beecher2. Will look into house price inflation then.

edinburgher

Well, if it's only for 6-12 months, what's the problem? Even with a £100k deposit you'd only be looking at inflation taking a few thousand of that.

As the last poster says, does it really matter unless it somehow prevents you from being able to afford a home? If I were you I'd be more interested in what happens with the housing market than a few % on your deposit.

rrf494g

the point of saving for you is to buy a property. And if house prices continue to fall you will still be losing money even after you have made the purchase, which all makes the point . . .

that money is a means to an end, not an end in itself. It's all about choices. You could moan about "losing" money on your savings and then moan about "losing" money on your house value OR you could be glad about being able to save up for a property, and then be glad about having your own place. Your choice.
regards

pph

edinburgher wrote: »

Well, if it's only for 6-12 months, what's the problem? Even with a £100k deposit you'd only be looking at inflation taking a few thousand of that.

.

Point is correct but I can't write off a few thousand without grimacing. I was only really posting to see if anyone had a way of beating the inflation > saving rate trap.