What is Inflation?

by Sophie-Jane Keelaghan, MRICS DipPFS - Financial coach, money mindset expert, and experienced wealth manager Partner of St. James's Place Wealth Management Group

by Sophie-Jane Keelaghan, MRICS DipPFS - Financial coach, money mindset expert, and experienced wealth manager
Partner of St. James's Place Wealth Management Group

Inflation is a general increase in prices and fall in the purchasing value of money.

 

Why is Inflation back in the news?

Inflation hasn’t been in the news for a long time and we’ve been in the situation where we’ve seen inflation-lowering over the last 30/35 years.

There are 2 factors at the moment which are triggering this new rise in inflation:

  1. The effect of inflation caused by the fall in the value of sterling since early 2016. The value of sterling started to fall in the first half of 2016 prior to the EU referendum vote, and we have seen this continue post-referendum, with the value of sterling falling further. This has brought inflation to our door. For most of us, we can see this when buying things like food, cars and holidays
  2. ‘Trump-flation’ which is importing inflation to us from US. With Trump creating stimulus through substantial infrastructure investment in the U.S., this is fuelling inflation.

 

What’s the impact?

Let’s wind the clock back to January 2007- if you had £10,000 of spending power, you would now need to have £12,534 to have the same spending power today because of impact of inflation. This doesn’t look to bad but remember that inflation has been relatively low between 2007 and now, whereas now it is on the increase.

Money in banks and building societies is earning very low interest rates and this has been the case for some time now. In fact, there are no banks or building societies out there who can offer an account which will give you a higher rate of interest than the current rate of inflation (2.3%), in fact there is only one cash ISA out there which does. This means that unless banks and building societies begin to increase the rate of interest they will give you on your cash, then the spending power of money in your bank account is going to be eroded.

Although cash is essential for short-term emergencies and known event, using a bank or building society account is not an effective way to grow your money, and so it really is worth taking the time to understand what your investment options are to get your money working harder for you.

The Partner represents only St. James's Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group's wealth management products and services, more details of which are set out on the Group's websitewww.sjp.co.uk/products. The 'St. James's Place Partnership' and the title 'Partner' are marketing terms used to describe St. James's Place representatives.


WRITTEN BY SOPHIE-JANE KEELAGHAN

To get in touch with Sophie for an initial chat or to book in your own Discovery meeting, please reach out to her at this email: sophie-jane.keelaghan@sjpp.co.uk, or give her a call on 020 7638 2400/07970 299980.

Sophie-Jane Keelaghan DipPFS, MRICS is a Partner of St. James’s Place Wealth Management, a FTSE 100 company which has £71.4bn of client funds under management.

Sophie-Jane is a financial coach, money mindset expert, and experienced wealth manager. Sophie-Jane became professionally qualified as a Chartered Surveyor in 2007, before being made redundant in the wake of the global financial crisis in 2009.

During this period of personal financial chaos, Sophie-Jane sought advice and quickly realised how few financial advisers there were out there who she could relate to, and who could relate to her, a 27 year old female professional. As well as this, the language that the advisers used when they spoke to her seemed unnecessarily complicated and full of jargon, and so guess what, she didn’t make a strategic plan with an adviser, and instead just focused on paying her bills every month!

Sophie-Jane decided to retrain and to become a financial adviser, and she has spent the last 7 years growing her business, through recommendations. Her specialisms are tax-efficient investing, retirement planning and financial protection. Sophie works with business owners and City professionals, both male and female! Sophie-Jane is passionate about making financial planning more engaging and enjoyable, and then watching how this helps her clients to achieve their personal goals.