This archive report was first published on 14 July 2021.
With inflation on the rise, Kenyans are facing a challenging economic environment. The cost of living is increasing, and savings are being eroded. However, there are ways to protect your money from inflation's impact.
According to economist Ken Gichinga, investing in assets that offer returns higher than the inflation rate is key to shielding against inflation. In June 2021, inflation stood at 6.3 per cent, and Gichinga advises that to beat inflation, you need to invest in assets that offer returns of above six per cent.
He notes that the wealthy tend to look for returns that are above inflation and sometimes invest in asset classes that offer higher returns, but come with associated higher risk. Gichinga also emphasizes the importance of differentiating between nominal and real return, as inflation can eat into your savings or investments.
When it comes to investments, Gichinga advises that you need to have an understanding of where you are putting your money and get as much information as possible. He also notes that well-off people in any society tend to consume a lot of information, which gives them an edge over everybody else.
During the pandemic, affluent Kenyans channeled their money into foreign currencies, fixed deposit accounts, government securities, and gold. However, these options may not be suitable for everyone, and it's essential to understand the pros and cons of each asset class.
Ultimately, beating inflation requires a combination of knowledge, understanding, and smart investment decisions. By educating yourself and making informed choices, you can protect your savings and achieve your financial goals.
