How to build short-term savings in the current high-inflation environment

Inflation, the cost of living crisis, and currency depreciation

All over the world, people are reeling from the intense inflation plaguing national economies. The UK is facing over 10% inflation, which has led to a cost of living crisis. Salaries have not even come close to keeping up with rising costs of food, heat, and other basic necessities, so people have been unable to pay their bills, let alone save or invest much at all. 

Currency depreciation is one of the scariest financial impacts of inflation: in Argentina, the country is currently facing over 100% inflation, which has left everyday people with virtually nothing. In Lebanon, it’s even worse: the inflation rate is at 190%, with its currency depreciated by up to 98%. Savings accounts have gone down to zero, and people are left with very few options.

In this article, we’ll define short-term investments, consider what kinds of goals people create short-term investments for, and share some examples of the best short-term investments to consider, even in challenging times. 

What are short-term investments?

Short-term investments are typically investments whose returns you hope to use within three years — not an investment that’s meant to grow for decades before you can use it, like a college fund or retirement account. 

Some short-term saving goals include buying a used car, paying off a credit card or a small loan, building up an emergency fund, doing a small renovation, or replacing a piece of equipment. 

The best short-term investments are low-risk, low- to medium-yield options. In other words, short term financial investments should be as safe and stable as possible, as these investments don’t have time to recover from general economic volatility like long-term investments do.

Short-term investments to avoid

Especially in unstable economic environments, bad investment opportunities are everywhere, and short-term high-yield investments are few and far between. Since short-term investments largely don’t have time to recover from economic challenges, it’s especially important to vet your options, avoid anything volatile, and avoid predatory lenders.

Avoid stocks and even stock funds

Stocks are only good for long-term investments, as they’re deeply tied to overall economic volatility. For short-term investing, single stocks or even stock funds are likely to mirror current economic conditions — which are unfavorable right now, to say the least — but even in better economic times, it’s impossible to predict when things could go sour and the value of your investment could tank. 

Avoid payday loans

Though payday loans can be tempting, especially when just trying to make ends meet or trying to build up any amount of financial cushion, they are often called predatory lenders for a reason: they keep people trapped in a cycle of debt with impossible interest rates. They’re not a suitable investment strategy in any way.

What’s a good short-term investment?

Here are a couple of the best short-term investment strategies you can use to build short-term savings. In all investments, even short-term, it can help to start small. If all you can manage is making micro-investments, even just a few dollars a month, it’s always better than nothing, so get started with what you can. 

Finally, diversifying investments is always the safest way forward. Never put all your available funds into one investment opportunity, as every investment carries risk. 

1. Buying USD

Though it can be rife with regulatory challenges and fees, buying US Dollars is one of the ways that people in inflation-stricken countries have tried to stay afloat and built up any amount of short-term savings. 

2. High-yield savings accounts

Typical savings accounts only offer an average of 0.37% yield, and high-yield savings accounts tend to go up to around 4% yield. It’s not huge growth, but high-yield savings accounts can be a helpful, stable, and safe option for short-term investors, as they are about as low-risk as investments can get. However, if a country is struck with currency depreciation, funds in savings accounts are often depleted. 

3. Cenoa

Cenoa can be part of anyone’s short-term investment plan. It’s a new fintech app designed to help people everywhere slowly but steadily build up wealth over time — but with up to 5% yield, it can still be a great bet for short-term investments. Cenoa allows users to buy digital dollars on par with USD, which is infinitely easier than going through the challenges of buying USD. 

4. Short-term corporate bond funds

According to Bankrate.com, short-term corporate bonds are bonds issued by major corporations in order to fund their investments — and bond funds are combinations of corporate bonds that risk-averse investors can buy as a set. Corporate bond funds are a generally safe bet, and what makes them great short-term investments is that they pay out on a regular basis, often twice a year. 

Cenoa is a great part of any short-term or long-term investment strategy 

Learn more about how you can start building savings steadily — even in the toughest economic times — with Cenoa.