Real Estate A Good Hedge Against Inflation?

As a kid, I used to think that saving money and “accumulating wealth” in my savings account of a bank in Singapore is the ultimate way to riches. I guessed most of us were brought up that way. Be thrifty and let the banks help us “make money and let it grow”. I believed many Singaporeans can identify that with me.

Little do I know that in today’s context, this may be a route to nowhere, or blatantly speaking, a financial disaster. In today’s complex world with so many bailing out, erratic market forces, high inflation and inconsistent currencies, how sure are we that the hard-earned money we have been saving and keeping in the bank is the way to hedge against the inflation of today?

While we get the pathetic interest rates from banks on our savings account, do we really think the interest that we earn per year is enough to create wealth, or are we really draining our money away daily? Just in case this begin to sound confusing, just follow the below example:

Let’s assume you put with the bank S$100,000. The interest rate is 0.5% per year. That would mean you would have “made” $500 after a year. Sounds exciting? Maybe for some but definitely not for me. Now let’s say we are now experiencing an inflation across the country at a mere 3%. How much is your S$100,000 worth now? That is S$3000 “lost” in value. Now technically speaking, the value of your S$100,000 is S$3000 lessor in value. So does that still sound fun to you now knowing that we are “losing” money daily. Well of course when you go back to your bank tomorrow, the bank teller will not tell you that your amount has reduced, but what I am really talking about now is the value of your money.

So if we technically lose money like that without doing anything, definitely, we can make money without doing anything right? So what can we do?

Invest in Real Estate to hedge against inflation. Sounds risky? Yes, if you are not financially educated or have a low financial IQ. But if these two elements are intact, then you are on your way to achieve your financial freedom. In my own personal experience, this is still by far the most promising, stable and best hedge against inflation, whether in the bull or bear market. Do stay tuned in my next update on how we can choose to start this journey to your financial education to financial freedom. Awesome! :)

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