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How to save your money from inflation with a deposit?

The issue of protection and preservation of savings is relevant at all times, but it is especially acute in times of instability. In the conditions of high inflation, declining income levels and pessimistic forecasts, Ukrainians are increasingly thinking about how to save their earned funds from depreciation in order to look more confidently into the future. The easiest way to save money is a bank deposit. In this article, we will consider how much we lose from inflation, whether deposits are profitable to protect against it, and how much deposit rates allow us to compensate for these losses and also earn additional income.


How to save money during war to minimize risks

During martial law, it is especially important to manage family budget rationally and to have a financial reserve in case of unforeseen situations. In such conditions, it is crucial to have a reserve of funds, which should be enough for several months of the family's life in case of loss of property or sources of income.

Where to keep money during the war? You can keep these funds at home in cash, but this method carries several significant risks:

  • Risk of loss of funds due to theft, military operations;
  • The risk of spending savings that are always at hand;
  • The risk of depreciation due to inflation.

The prospect of the first two events is not that high, while inflation with a 100% probability will relentlessly "eat" our savings month after month.


How inflation affects savings and how much we lose each year

What is inflation in simple words? Inflation is a decrease in the purchasing power of money, when you can buy less and less every year for the same amount of money. Agree, 1000 hryvnias now and 1000 hryvnias 10 or 20 years ago are completely different money and you can buy completely different things with them.

Today, these funds are enough to go to the supermarket once for groceries, and 10 years ago it was quite a decent amount. From the point of view of purchasing power, 1,000 hryvnias in 2013 is only 250 hryvnias at today's prices, that is, in just 10 years, your funds have lost 75% of their real value!

Inflation in Ukraine in 2013-2023 cumulatively

Data: minfin.com.ua


The conclusion is obvious: simply keeping money at home or in a bank current account is unreasonable and short-sighted. So let's figure out how to save money profitably.

What is the best place to keep money to protect it from inflation

For most Ukrainians, the easiest and most common way to save money is to deposit money in a bank. The advantages of deposits compared to other investment methods are obvious:

  • Opening a deposit does not require additional knowledge, great effort or involvement of consultants;
  • The amount of income from the deposit is clearly defined, and the receipt of interest and return of the deposit is guaranteed;
  • The investment amount is minimal, and the investment term can be chosen from 1 to 24 months;
  • Rates on deposits in hryvnia exceed the inflation rate, so they allow not only to protect funds from depreciation, but also to multiply them.

The interest rate at which you can deposit money in the bank depends on the NBU discount rate, which, in turn, takes into account the level of inflation - the higher the inflation, the higher the deposit rates. The National Bank conducts a consistent monetary policy aimed at increasing the attractiveness of hryvnia deposits of the population, and as a result, the rates on these deposits were significantly higher than the inflation rate.

Consider the situation that you placed a hryvnia deposit for 12 months on January 2, 2023, and whether the income you received for 12 months was higher than the inflation rate in Ukraine in 2023.

Inflation table

By opening a deposit in Agroprosperis Bank, you would receive 18.5% annual income, which after deduction of taxes would amount to 14.89% per annum. Subtract inflation of 5.1% from this figure and get 9.79% of net income for the year. That is, you would be able not only to compensate for inflation, but also to receive additional income, almost twice as high as the level of depreciation.

If you deposited UAH 100,000 at home on January 2, 2023, you would have lost UAH 5,100 due to inflation, if you had deposited UAH 100,000 on a deposit with Agroprosperis Bank, you would have earned UAH 9,790 in net profit after deduction of taxes and inflation. The conclusion is obvious.


The best way to keep money on deposit and which deposit to choose

It is obvious that a deposit in UAH is a more effective tool for compensating inflation risks than USD deposit, since the yield on UAH deposits is much higher.

However, if you are deciding whether to keep money in UAH or USD, we recommend diversifying your deposit portfolio and keeping part of the funds in foreign currency in order to protect not only from inflationary risks, but also from the risks of devaluation of the national currency.

A convenient solution is the registration of a long-term deposit with the possibility of replenishment. Such an investment will allow you to get a significant profit if the rates in the market will fall. Since the interest rate on the deposit is fixed for the entire term of the deposit and applies to the amount of the deposit and the sum of all replenishments, you will receive the same high rate for placement of new funds than if you opened a new deposit.

Read more about choosing the optimal deposit in our blog article How to choose a deposit?

Oleksandra Topol Head of marketing

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