Inflation is the decline in the value of your money over time. As more cash enters the system and people become more wealthy, the result is that you will have to part with more of your cash for an item.

The UK aims for gradual inflation of 2 - 3% per year based on an average basket of goods. You can see what is in this basket here.

But the banks are paying you less than 1% interest on any cash you hold in their accounts. This means that your money is losing value in the grand scheme of things!

Nowadays, the only real way that you can beat inflation is to invest in the stock market, which returns (on average) 9.2% annual growth. This is difficult for a lot of people because there is risk involved with investing and it’s a topic that many are completely uneducated on.

Therefore, the majority of people will never beat inflation. With only 2.2 million Britons having opened a stocks and shares ISA in 2019, it’s more important than ever to be aware of inflation and how you can ensure that your money isn’t losing value.

Can you imagine putting £100,000 away as a nest egg only to find out that it’s worth half that when it comes to retirement! This is why you need to be open to the idea of investing.

You would never pay into a pension and expect them to just sit on your cash until you retire. Could you imagine if you only received back your contributions plus maybe 50% gains in interest over 40+ years?

You would laugh them out of the room! So why are you treating your bank account any differently?

There are more ways than ever to invest in 2021, and I want to share a few of these with you:

1. Open a fully managed S&S ISA with £500

   With Nutmeg you can put your feet up and let them do all the legwork for you after determining your risk appetite. This account tends to extremely well and you can smugly call yourself an investor whilst beating inflation! My Nutmeg ISA reached 11% growth in the last tax year (Risk level 8/10)

   You can see my full thoughts on Nutmeg in our blog post from a few weeks ago! (Plus you can get 6 months fee-free with my link!)

2. Invest in Index Funds for free

   You can open an account with Freetrade or Trading212 (if they ever accept new customers again) and purchase shares in index funds for as little as £1 with no fees incurred. You could buy shares in VUSA for example which tracks 500 of the largest US stocks (S&P500 - which since inception in 1926 has returned on average 10-11% annually.)

   What’s more, you can grab a free share when signing up for these accounts by using our links shown here.

3. Contribute to your pension

   You may already be paying into your workplace pension, but if you can and you aren’t doing so - you need to be! The state pension is currently only £179.60 per week, this is likely to be similar when you are at retirement age. So if you are expecting a lavish life in retirement, you had best be contributing to your pension.

   This is a great way of gaining exposure to the stock market and will help you achieve the financial freedom you want for retirement.

   You can check out more on pensions here.

There are a lot of ways to be investing in the 21st century so never discount any, but you can be sure to check out a lot more of these ways in our new investing guide; The Grand Guide to Investing.

If you have any questions please feel free to reach out and we will answer them.