Understanding inflation and reducing its risk to our savings

   It's important to understand the risks inflation have on our savings over time. Reducing some of these risks is possible. Be smart about debt. Pay off high interest debt first or refinance at today's lower rates. This will increase cash flow for savings or allow more of our payments to go to principal reduction. Inflation has averaged around 3% annually. The spending power of our savings is eroded over time if we don't earn at least that much on our savings. I think Treasury Inflation Protected Securities, or TIPS for short, should be at least a small part of every portfolio. TIPS pay a variable interest rate based on the inflation index so spending power of our capital is protected. This does limit our upside for growth, reducing risk also has its costs. Having the right mix of stocks and bonds like TIPS is going to be different for everyone. Generally, we should add more bonds and less stock to our portfolios as we age. We want to reduce the risks of stock market downturns just when we start to withdrawal from savings. Finwiz.