Why are prices rising so quickly now and What can Brits in Spain do to get more money for their euro?
Prices have risen sharply in the UK, Spain and many other countries over the last year. The speed of those increases are called the rates of inflation.
As A Brit Living in Spain you will have really noticed this most when filling up at the petrol stations here with this week’s price passing 2 euros a litre.
There is more than one reason why the rate of inflation is so high now.
The rise can partly be explained by the economic recovery from Covid. As restrictions eased, people started to spend again.
The increased demand for overseas goods led to shortages, as businesses couldn’t meet the demand.
Russia’s invasion of Ukraine caused further supply chain disruptions resulting in increased energy and food costs.
Disruptions in the energy sector are likely to continue as Europe is now more than ever determined to reduce its energy dependency on Russia.
The lockdowns in China (due to Covid) are also making it harder to import some goods, resulting in price increases.
All these factors have laid a strong foundation for the return of lasting inflation across developed markets.
At the time of writing, the latest annualized inflation figures are for 8.3% in Spain, 7.5% in the Euro area and 9% in the U.K.
What does high inflation mean for British people living in Spain?
High inflation means that your life in Spain will get more and more expensive even if you just keep spending on the same items.
If prices go up but your income stays the same, you’ll notice it won’t go as far as it did previously.
Inflation is hitting your Euro savings as well as other currencies such as Sterling, as the minimal rates of interest offered by banks are significantly below the rates of inflation, leading to loss of purchasing power.
You could protect your capital from inflation?
You could review your savings and investments with a trusted financial adviser who is appropriately regulated to offer investments to residents in Spain.
They can review your investments and savings and with your individual circumstances and the current market environment in mind, they can recommend changes to make your money work harder for you. Certain asset classes like inflation-linked bonds, listed real estate, higher yielding bonds, and certain sectors of the equity market will have better relative performance. Commodities, in particular, tend to provide a good hedge against inflation.
They should also review the fees of your existing arrangements, some of which may have been set up a long time ago and may no longer be competitive, and suggest how cost savings can be made.
Your savings will buy you less and less, and this effect will only get worse the longer you leave the funds sitting on bank accounts. A good adviser can suggest the best ways to put them to work for you.
Please contact me if you would like a private review as I have a top financial adviser here John Diking, who will be happy to advise you. davidinalmeria@davidinalmeriagmailcom
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