No vacation from inflation
If you’re like many Canadians, you may have a fair bit of your money tucked away in savings accounts, term deposits, money market funds and GICs. Investing in conservative products like these can provide you with some peace of mind given you are likely trying to shelter that money to preserve your capital. But are you really preserving your capital? Just because you’re not losing money doesn’t mean you’re not losing ground.
You may in fact be preserving the face value of your capital but eroding your purchasing power – which is equivalent to being able to buy less in the future with the dollars you’re protecting today. In the same way, if the dollars you saved yesterday or last year or 10 years ago do not earn an interest rate above the prevailing rate of inflation, while you may have the same amount in those accounts that money doesn’t go nearly as far as it once did.
When you look around at what things cost today, you can see the effects of inflation everywhere.
- The price of gas at the pumps is surging
- In January 2008, the average home price in Canada was $325,000. Fast forward to the July 2014, and the average home price in Canada was $425,000*
These price changes are all examples of how inflation can erode your purchasing power over time.
Talk to a Consultant about how you can preserve your buying power!
Reviewed : February 2, 2015
© Investors Group Inc. 2014 (08/2014)
Written and published by Investors Group as a general source of information only. Not intended as a solicitation to buy or sell specific investments, or to provide tax, legal or investment advice. Seek advice on your specific circumstances from an Investors Group Consultant.
* Average house prices as published by The Canadian Real Estate Association