Almost all over the world, the two things that everyone always seem to have something to talk about is either the government or the economy. It doesn’t matter whether it’s a developed or a developing nation, everyone always has a problem with the government and the economy.
One of the things we’ve also had to steadily deal with over the years is inflation. Inflation which is marked by an increase in price of goods, services and generally cost of living.
Saving for the rainy day is something most people do and some even spend a lot of time and effort into making the saving culture a part of them. Saving is done for quite a lot of reasons, but the most prominent is saving for emergency purposes.
But with inflation in the picture, how does this affect saving. A quick example is the exchange of dollar to naira which is about 1 dollar to 1400 naira (street exchange) at the moment but just a year ago this same exchange would have given you about 600-700 worth of naira for a dollar.
This is about a 100% increase in exchange, imagine how that would affect price of goods and services especially if the nation does a lot of imports. Now for an individual who believes in saving, the money he kept last year would now worth less when he wants to do an exchange. It looks like the rainy day has turned into a stormy day.
I needed to get a power bank about two years ago, unfortunately I didn’t get it at the time. Mid last year I went to get a few things and I saw the same product and it had increased in price by half the previous price. I’m sure it’ll be double or close to double its price from two years ago. This is just a small example of the impacts of inflation.
I was talking to a friend and he asked, why not just invest the money and put it to use instead of just saving it somewhere. Of course, investing instead of saving always seems to be the first answer whenever such topics come up, but there’s just a few issues that I’ve had to deal with personally.
We can be quite emotional about our money and you’d probably hear the argument that the intention was to save the money for an emergency and not invest for an emergency. The second one is that investing has some level of risk involved and the fear of loosing their money amidst a difficult economical situation would leave most people skeptical about investing the little they’ve struggled to save up.
Inflation would really make it hard to convince anyone simply struggling to survive to also build a saving habit, much less an investing habit.