As the UK's inflation rate hits a 40 year high of 9.4% as the cost of living crisis deepens, what does this actually mean - and more importantly how does it affect us?
What is inflation?
Inflation is simply defined as the rate at which the prices of goods and services increase over time. This means that, as inflation goes up, so does the cost of living; hence why its continued rise is putting such a strain on our finances. The past month has seen a continued rise in petrol, food staples and energy prices - resulting in inflation jumping from 9.1% to 9.4% in the month of June alone. What’s more, with the energy crisis looming this Autumn, some forecasters predict this could rise as high as 12% in the coming months.
What does it mean for my money?
Rising inflation reduces the purchasing power of our money, meaning it won’t go as far as it did before. For example, the average price of petrol by the end of April 2022 was 162.75p per litre, however it has now hit a staggeringly high 191.53p. This is a particular problem for those on fixed incomes such as zero hour contracts and pensioners, compared to current contracted employees who are more likely to see their salary increase in correlation with inflation. However, as this isn’t a legal requirement for companies and the economic landscape is so unclear at this moment in time, we’re seeing less and less employers adjust their salaries, leaving their staff in a difficult position.
What should I do?
So, how can we protect ourselves against rising inflation? The truth is until we have more clarity on the situation, it’s unsure what is most beneficial to do - so our best advice is to save every penny you can. We share weekly tips on instagram as how to start saving, and once our app launches, we’ll give you gentle nudges as to where we think you could save money based on your spending.
No one knows exactly how high inflation will rise in the UK over the coming months and years, but what is clear is that it has the potential to cause significant financial problems for many people, with those on low and fixed incomes likely to be the worst hit. However, the Bank of England have pledged to once again decrease it as soon as possible, and the government has already begun aiding millions of households with their energy bills - reducing pressure over the Autumn and Winter period. What’s more, if we #ActNowSaveLater, there’s a chance we’ll be able to reduce the negative impacts caused by inflation - and Incredible is here to help you do just that!