The results of a survey by Mr. Dick and Knack / Le Vif show that 4 in 10 Belgians expect that their purchasing power will decrease in the coming 5 years. Is this pessimistic vision justified? Good Finance, Chief Investment Officer of Mr. Dick examines this question and indicates things to remember.
What is purchasing power?
The purchasing power is determined by the amount of goods and services that can be purchased with a certain income. If the prices of raw materials such as food, oil, etc.
increase – that is called inflation – without wages also increasing proportionally, the purchasing power of families will decrease. And that is precisely what 4 in 10 Belgians are afraid of.
Baby boomers are concerned about the low interest rates …
If the Belgians are rather pessimistic about the evolution of their purchasing power, this is mainly due to the rise in inflation and the limited rise in wages. Since the 2008 crisis (with the index jump), a stricter budget policy has also been added. The baby boomers, born between 1945 and 1965, are the most pessimistic. Almost one in two of those surveyed fears that their purchasing power will decline in the next five years. ‘Of course we understand that people approaching retirement age are concerned about their purchasing power. Especially since their capital only yields a negligible return if it was placed in savings products, “Good Finance explains to us.
A large number of people under 35, on the other hand, expect an increase in their purchasing power.
That makes sense because they are still at the beginning of their career, where the prospect of growth is greatest.
‘The prospect of a slight acceleration of growth in the euro zone and the fall in unemployment should support wages. Certainly in Belgium with the index system,’ explains Good Finance. ‘The fact that baby boomers are leaving the labor market is a second favorable element for wages. Their departure is already creating shortages for some posts. “That will have a positive impact on purchasing power.
Savings products remain the solution for spending in the short and medium term. There are investment products for everyone in the long term ‘
Saving is not the solution!
If you are part of the 4 Belgians out of 10 who are worried about a loss of purchasing power, saving alone will not provide a solution. The interest rates, still at a historic low, are unable to compensate for inflation. In short, the purchasing power of your savings … is decreasing.
“Savings products remain a solution to maintain cash reserves and finance spending in the short and medium term,” explains Good Finance. But there are investment solutions for all investor profiles.
Tailor-made investment solutions
“In the current context, investing is only worthwhile for capital that you do not need in the next 5 years,” warns Good Finance. That does not mean that withdraws or people close to retirement cannot invest. On the contrary, there are investment formulas tailored to their needs. For example, investment funds that generate a recurring income so that the long-term position is maintained while enjoying a supplementary pension. Those who are gradually preparing for retirement should start early with these investments in order to benefit from the tax breaks and the rising markets in the long term. That is also a longer investment horizon from which the optimistic Good lender can also benefit.