Inflation changes the rules of the financial game. What used to be smart money moves—like keeping a large savings balance or avoiding debt—may no longer work in your favor when prices start to rise. So what should you actually do? According to Registered Financial Planner Josefino Gomez, the key lies in making tactical adjustments.
“In general, lenders are disadvantaged while borrowers have the advantage,” Gomez told Financial Adviser PH. “If you have an excessively large savings account in the bank, you might want to invest in longer term instruments for those cash you would not need soon.”
Inflation erodes the value of money sitting idle. That means your hard-earned cash in a savings account is likely losing purchasing power, especially when interest rates on deposits don’t keep pace with rising prices. Instead, Gomez suggests deploying surplus cash into investments that offer better protection, such as equities, real assets, or even long-term fixed income options with higher yields.
When it comes to borrowing, the situation is flipped. Fixed-rate loans can actually become advantageous during inflationary periods.
“When borrowing, you might also consider borrowing with a fixed rate for a longer term,” Gomez said. “This way, you lock in today’s rates while the value of the money you repay over time becomes cheaper in real terms.”
However, he cautions against borrowing for non-essential or depreciating expenses. The strategy works best for meaningful, long-term investments—like education, property, or a business expansion—that have the potential to outpace inflation.
Gomez also advises reducing your bond exposure, especially with fixed-rate instruments. “Being a bondholder means you are a lender. Bondholders could be hurt during inflationary times as the interest you receive is usually fixed,” he noted.
Ultimately, the right balance depends on your goals, time horizon, and risk appetite. But one thing is clear: in times of inflation, blindly saving or avoiding debt isn’t always the best move.
Being strategic with how you borrow and where you save could make all the difference in protecting—and even growing—your wealth.
