Inflation has become an existential threat to many families’ finances. As prices climb, making ends meet becomes an even greater challenge. When the costs of food, transport, utilities, housing, and healthcare rise rapidly, it is natural to wonder, “Does saving money during high inflation still make sense?” Or are we better off spending it now before it loses even more value?
It is a fair question. After all, if inflation is running above 30 per cent, and fixed deposits or mutual funds are offering just 10–20 per cent interest—or even less—are not you just watching your money lose value? The answer is both simple and complex. Yes, high inflation reduces the purchasing power of your savings. But no, that does not mean you should stop saving. In fact, saving and investing strategically during high inflation is not just wise—it is necessary.
Let’s look at why saving (and investing) still makes sense during high inflation and ways you can protect the value of your money.
Emergencies do not pause for inflation: Even in tough times, life goes on. Emergencies do not go on vacation or relocate. Medical emergencies, major repairs, job losses, business disruptions, or unexpected expenses can happen without warning. Without savings, you may be forced into high-interest debt (with rates even higher than inflation) or worse—forced to sell off assets at a loss just to survive.
An emergency fund acts as your financial shock absorber, allowing you to handle crises without going broke. High inflation makes emergencies even more expensive, which makes that financial cushion more important than ever.
Saving builds discipline: Spending less than you earn is a fundamental law of personal finance. If you break this law, you end up in financial jail—no matter your excuse. You may blame inflation for your lack of a savings habit, but some of your peers are still saving. Rather than explaining away your lack of resourcefulness, you can choose to learn from them.
The act of setting aside money regularly—whether it’s N2,000 or N20,000—builds the habit of financial discipline. In volatile economies, those who learn to spend below their income, plan ahead, and control their spending are the ones who survive the hard times and thrive when the economy stabilizes.
Savings inspire an abundance mindset: One source of income may not be enough to achieve your savings and investment goals—especially if you dream big. The drive to meet your goals often pushes you to create additional streams of income. This could mean expanding within your current business or generating income from your skills and hobbies.
With multiple income streams, you have the power to set bigger income and savings targets. Instead of staying boxed in by your current earnings, you break out and create more opportunities for yourself.
Investment opportunities still exist: High inflation may reduce the value of idle cash, but it also creates opportunities. Economic downturns and inflationary periods often open the door for wealth transfer. Businesses, properties, and other assets frequently go up for sale at steep discounts. There is also the “japa” wave, which has created a market for discounted assets as families rush to raise funds for relocation. With cash savings, you are in a position to seize these opportunities.
I know someone who bought a distressed property at half the price, put it back on the market and sold it for full price. He made over N100 million in less than a month. Why? Because he had the cash ready to close the deal.
If you don’t have savings, you will only be watching these opportunities pass you by—if you even hear about them at all.
Where should you save?: When you make up your mind to save, you will find a way to start. Nothing is too small. You can begin with as little as N100 a month if things are really tight and gradually increase as your situation improves. Forming the habit is more critical than how much you start with.
While saving is essential, where you save becomes even more important during periods of high inflation. In times like these, it is smarter to place your money where it has a better chance of holding its value. Here are some options to consider:
High-interest savings and fixed-income investments: This is a good first place to start. The minimum amount required will vary depending on the financial institution or investment provider. Look for savings options that offer higher interest rates, such as:
Fixed deposit accounts: Some financial institutions offer high-interest fixed deposit accounts with competitive rates ranging from 5–10 per cent or more, depending on the amount you invest. The tenor usually ranges from 3 months to 1 year, with the option to roll over and earn compound interest.
Treasury bills: These are short-term government securities issued by the Central Bank to raise funds. Treasury bills are considered one of the safest ways to invest your money since they are backed by the government. Tenors range from 91 days to one year.
Commercial papers: These are short-term debt instruments issued by large, reputable companies to raise funds for their short-term financial needs. They typically offer higher interest rates than treasury bills or fixed deposits because they come with a slightly higher risk. Tenors are usually less than one year old.
Government bonds: These are long-term investment instruments issued by the government. You receive regular interest payments (called coupon payments) over the life of the bond. Tenors range from two years to as long as 30 years. There is also a secondary market where you can sell your bond if you do not intend to hold it until maturity. Some corporate organisations also issue bonds with competitive returns.
Money market funds: In a money market fund, professional fund managers pool money from different investors to invest in fixed deposits, treasury bills, commercial papers, bonds, and similar assets. Some funds accept contributions as low as N2,000, allowing you to save monthly or at whatever intervals work best for you.
These options may not completely outpace high inflation, but they help reduce the erosion of your money’s value compared to leaving your cash idle in a regular savings account.
Hard assets: Historically, tangible assets often hold their value better than cash during inflationary periods. However, you must do proper due diligence before investing. Examples include:
Real estate: Real estate in a good location tends to hold its value better than cash. To generate income from your real estate holdings, you may need to lease the property or develop it to start earning rental income.
Precious metals: Gold, in particular, tends to hold value and even appreciates during economic downturns. You can invest in gold in the form of jewellery, which can also be used personally or rented out to generate additional income.
Agricultural investments: Owning farmland is another way to invest in real estate. By planting valuable cash crops, you can earn returns above the inflation rate while also benefiting from the appreciation of the land itself.
These assets have the potential to appreciate over time, helping offset the effects of inflation while providing cash flow.
Dollar and foreign currency savings: Holding part of your savings in stable foreign currencies (such as USD, GBP, or EUR) can help protect your purchasing power, especially if you earn income in foreign currency. Some banks offer dollar-denominated products that provide competitive interest rates while preserving value (relatively).
However, ensure that your method of acquiring foreign currency complies with all Central Bank of Nigeria guidelines and does not involve currency speculation or other prohibited practices.
Saving during high inflation requires a shift in mindset. It is not just about setting money aside but also protecting its value through smart choices. In the next article, we will explore smart strategies for saving during high inflation and how you can make the most of your savings no matter the economic climate.
- Uko, a writer and business and finance coach, writes via [email protected]
