I live in Europe with my parents. I work and I have around 18k € (US$ 20k) in my bank account.

I know that money loses its value over time and I wonder what I can do with that money and my income over the coming months to avoid it being affected by inflation and losing its value. I would like for this money to to be readily available should I need it because I plan to help my family financially in the next few months.

I'd appreciate any suggestions.

  • Look at other banks in your (or a neighboring) country which pay a higher rate. – RonJohn Aug 17 '19 at 13:29
  • Please state your country tag – mootmoot Aug 19 '19 at 11:24

For almost all of history and in almost all places, this is just an issue of finding your best risk-free investment because interest rates have historically been higher than inflation (positive real interest rate). However, in Europe especially, almost all fixed-income securities have negative real interest rates and many investments now have negative nominal interest rates (they pay negative interest). As a result, you don't really have any places to hide. Here are your options.

  1. Move your money to another country. This can be hard, and will also cause you to bear currency risk.
  2. Buy financial securities with some risk. You can put money in the stock market or buy fixed income securities that have enough risk that their yield is higher than the expected inflation rate. Of course, both of these have the possibility of losing you money.
  3. Spend the money on real assets. When prices go up, stuff you buy will tend to go in price as well. Gold, real estate, art, etc. Anything that has a selling price approximately equal to its buying price. Of course, these will all have risks as well.

Or you can just lose money. This low or negative interest rate regime will punish savers. It's the same thing that happens during monetary stimulus. The idea behind a stimulus is to punish those who save in an attempt to make people spend more instead. Your intention is to save, so you are going to be punished if you do.

Since you plan to use the money in a few months, your best bet is probably just to keep doing what you are doing. You won't loose that much.

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The inflation rate of the Euro is currently quite low. It fluctuates around 1% per year. That means keeping 18k in a bank account with zero interest means a loss of purchasing power equivalent to 180 current € per year. This isn't all that much compared to other currencies, but it is not nothing. But you can cancel it if you find any way to invest your money which yields a yearly interest rate of at least 1%.

Possible options are:

  • Put the money into a money market account with your bank. This is a bank account which is almost as easy to access as your regular bank account but offers slightly better interest rate.
  • Put the money into a managed stock fund. A stock fund is a mixed portfolio of a wide array of stocks managed by professional stock brokers. This allows you to invest into stocks without the requirement to actually know much about trading stocks or having to pay constant attention to stock charts.

    Banks usually offer a variety stock funds with varying risk profiles. A more risky fund will usually gain more value over time, but its value will fluctuate more. So when you need the money, you might have bad luck and discover that the value is very low at that time. It will (hopefully) recover eventually, but that won't help you much if you need cash now.

  • Save it for your future. Depending on where exactly you live, the government might give you extra money for various forms of retirement saving or saving to buy a home one day. But due to the earmarked nature of these saving programs, it is usually very difficult to obtain these funds for any other purpose. So it is not an option for money you might need access to.

In any case, you might want to make an appointment with a customer consultant from your bank to discuss what they can offer you.

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    Is "money market account" generally a thing in the eurozone? I've never heard about it in Denmark, and thought it was an American-only concept. – hmakholm left over Monica Aug 17 '19 at 13:29
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    @HenningMakholm It's a thing in Germany where it is called "Tagesgeldkonto". – Philipp Aug 17 '19 at 20:28

You can currently earn about 2% per year in the US with an online savings account. This may be more than your bank is paying. This is probably the best you can do if you may need the money in a few months. Note that over such a short period, both interest and inflation effects are likely to be small.

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  • Thanks for the answer. I'm from Europe. So online savings account is something seperate from my bank? Do I need to transfer the money etc? And as for the overall time frame, I've already have that money for about a year now :\ and I'm going to continue to work and save money for about another year or so(but I will use some of the money as I said in the post for my family needs). – bigi Aug 17 '19 at 7:44
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    @bigi you being in Europe is a very important piece of information which you should have mentioned in the question. I will edit it. – Philipp Aug 17 '19 at 10:31
  • This doesn't really answer the question if inflation is more than 2%. – chepner Aug 17 '19 at 15:07

Europe is big. Which country do you live in?

As you seem to need the money in the next time, I'd put it into an account where you can retrieve it in a short time.

Eiter you take an offer from your bank (which might go from 0% to about 2%, depending on where you live), or, if you are from Germany, you could use a service like Zinspilot or Weltsparen.

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Inflation rate Europe wide is different from the country where you live (or even better your personal spending needs). But if you want the money to be readily available there's probably nothing better then a 0.01% savings account or something is that region - again it depends on where you are in Europe (Euro zone as you question mentions Euro). Taking it anywhere else means that you will have more risk or you can't get at the money when you need it. Even so with investing it in another currency.

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