Many of the effects and costs of inflation on individuals and families depend on whether people can take steps to protect themselves from the impact of rising prices.

Real disposable incomes are likely to dip in the next year or two as the effects of steep increases in essential bills show through. The Telegraph today has a feature on some of the ways in which people can limit the damage. And the Press Association reports a £8 per week decline in disposable income. “Despite average earnings increasing by £23 a week during the past 12 months, the typical family has 6% less disposable income after meeting all their essential outgoings”. The definition of disposable income used is slightly different from most textbooks (which tend to adjust only for changes in direct and indirect taxes and welfare benefits). More here

“Inflation is a silent thief, quietly reducing the value of your savings while no one is looking. Even with relatively low inflation, the buying power of your cash savings is significantly reduced over 10 or more years. With inflation running at 4.3 per cent your money is effectively halved in just 17 years. Even if inflation falls to 3 per cent, £100,000 in the bank will have lost a quarter of its value a decade later.”

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