Martin Hawes: Inflation risky for savings

Over the past year, there has been a global debate about inflation.

Some say high inflation is inevitable - high government spending means printing more money, which will see increased prices.

Others say deflation is the bigger risk and central banks will manage money supply perfectly well as the economy recovers.

I don't know who is right - but there is a risk that inflation will get away again and you would be mad to ignore the possibility.

Inflation robs those with savings and benefits those who have borrowed to buy things such as property and businesses.

This transfer of wealth from savers to borrowers can devastate the finances of the unwary.

Those investing for income must put a proportion of your money into property trusts and shares, which tend to give growth that at least matches inflation, instead of deposits and bonds which don't increase income.

Younger people with debts need to be ready to fix their mortgages. Many are enjoying low floating mortgages, but are carrying a big risk by doing so. You should match a long-term asset (your house) with long-term borrowings (a fixed-rate mortgage).

Martin Hawes is a financial adviser. His disclosure statement can be found at www.wealthcoaches.net

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