In the past year, we have lost approximately 9 billion euros in purchasing power on our savings, according to Geld.nl, a comparison site for insurance and financial products.
This loss is caused by high inflation and extremely low interest rates over the past year. Goods and services have become more expensive at a rapid pace, but our savings are not rising in proportion.
In Geld.nl's calculation, only freely withdrawable savings were included. Deposits, i.e. savings that are tied up for a specific period, were not included in the calculation. In general, one receives a higher interest rate on a deposit, but even the highest deposit rate this year was not higher than the average inflation rate.
Last Tuesday (January 11, 2022), CBS reported that the average inflation
rate for 2021 came to 2.7%, while the average interest rate was only 0.05%. According to Geld.nl, the total value of freely withdrawable savings amounted to some €340 billion. So Dutch people received €170 million in interest last year.
However, the savings deposits have become worth €9.18 billion less due to inflation. Corrected for the €170 million in interest received, savings deposits have therefore lost just over €9 billion in value over the past year, an enormous loss in purchasing power.
Inflation is almost always higher than the savings rate, so this depreciation doesn‘t come out of the blue, but we do not see such a large difference between interest rates and inflation very often. Still, there are ways to hedge against this loss of purchasing power.
Over the past year, we saw crypto and stock prices skyrocket. Many people sought refuge and found it in investing their money. Meanwhile, even more than a quarter of young adults (18 to 30 years old) in the Netherlands trade cryptocurrencies
. Confidence in the monetary system as we know it today seems to be declining, so there is a shift to digital currencies, such as Bitcoin
Many see the future bright for cryptocurrencies, but we‘re not yet close to being able to pay with crypto in the supermarket, for example. There are still many steps to take in the areas of regulation and development of the technology. Furthermore, it is possible that the prices of stocks and cryptocurrencies will come to suffer from rising interest rates in the coming year, which is usually bad news for investments. Thus, it is advisable to trade with caution.