Inflation

MEEKUS

Hi
With inflation being high, and no savings account matching this, i thought i would pay in the money using my wages to combact the threat of my money depreciating into my emergency fund.

The question is how do i work out the yearly infllation %.

Thank you. 

masonic

Exactly what are you trying to do? Maintain the spending power of your emergency fund by topping it up to match inflation? If so, it would be best to base this on your own spending rather than using published rates of inflation.

MEEKUS

masonic said:

Exactly what are you trying to do? Maintain the spending power of your emergency fund by topping it up to match inflation? 

Yeah exactly that 

sevenhills

MEEKUS said:

The question is how do i work out the yearly infllation %.

Thank you. 

The Government give various figures for inflation, the CPI inflation rate is 5.4% and the RPI inflation rate is 7.5%

https://www.ons.gov.uk/economy/inflationandpriceindices

masonic

MEEKUS said:

masonic said:

Exactly what are you trying to do? Maintain the spending power of your emergency fund by topping it up to match inflation? 

Yeah exactly that 

The best option would be to track your spending over time. It's often recommended to keep 3-6 months living costs saved as an emergency fund to get through a period where you aren't earning an income. That can be tailored to your personal circumstances. As you see your expenditure increase, you can calculate what you now need in your emergency fund. Personal inflation is what matters in this approach, not a government statistic. Lifestyle inflation is an important part of a personal inflation rate that no government statistic is going to account for. A change in circumstances could also have a dramatic effect on your monthly spending.

MEEKUS

Thanks that makes sense 

sevenhills

Yesterday, a news item about the upcoming national insurance increase stated that it would stoke inflation.

Surely a tax increase that takes money out of the economy will help to get inflation lower?

Thrugelmir

Increased wage demands. 

masonic

sevenhills said:

Yesterday, a news item about the upcoming national insurance increase stated that it would stoke inflation.

Surely a tax increase that takes money out of the economy will help to get inflation lower?

Inflation is not being driven by exuberant spending.

GeoffTF

sevenhills said:

Yesterday, a news item about the upcoming national insurance increase stated that it would stoke inflation.

Surely a tax increase that takes money out of the economy will help to get inflation lower?

Yes, of course it will. Tax is not part of the cost of living tracked by the CPI or RPI, A tax increase takes money out of people's pockets, which reduces their spending. That reduces demand for goods and services. That reduces demand for labour. If people lose their jobs, they have less money to spend and that further reduces demand. Nonetheless, a 1% increase in NI is not going to make much difference though.