Inflation and increasing interest rates affect consumers’ financial situations substantially. The effects are particularly apparent for financial products like loans, savings deposits, investments, old-age provision, insurance and other investment products. The European Supervisory Authorities (ESAs),[1] have produced a brief consumer-friendly digital factsheet that is written in accessible language on “How do inflation and the risk in interest rates affect my money?”.
The European Supervisory Authorities (ESAs) make five key recommendations that everyone should bear in mind in relation to their financial planning:
- know how much you are spending and on what;
- prioritise your spending and plan your budget;
- pay attention to different fees;
- seek professional advice and optimise your financial planning;
- be aware that central bank interest rates may also affect you!
Specific tips about loans, insurance and pension products as well as insurance
The factsheet specifically addresses three key areas “Loans and savings”, “Investments” and “Insurance and Pensions” and provide practical tips about how you can protect yourself against unwanted surprises. For example, with regard to loans and savings deposits, recommendation are to compare interest rates, to weigh up the pros and cons of fixed- and variable-rate lending, to tailor chosen products to your specific requirements on an ongoing basis as well as to consider the risks and costs of overindebtedness in advance. In the case of investments they advise to focus on the real return of an investment rate rather than solely on the nominal rate of return, to diversify investments appropriately taking into account your individual needs, and not to be afraid, if need be, to seek professional advice regarding adapting your portfolio. In the case of insurance products and private old-age provision, the golden rule is to avoid taking hasty decisions! Insurance and pension products as a rule very long-term decisions, and extreme fluctuations in the short-term tend to in the long-term. Cover and provision should therefore take priority. For this reason, it is recommended to check your existing insurance policies on an ongoing basis: Premium, scope and level of coverage, overlaps between different combination insurance policies, premium optimisation by means of a higher policy excess.
Clear language, practical examples, usual tips
The ESAs’ digital consumer brochure about the effects of inflation and rising interest raes on the public’s financial needs has been written in clear and simple language, designed in a consumer-friendly manner and is tailored to the consumers’ needs. It focuses on their financial requirements, uses practical examples to explain the basics, and provides a lot of useful tips. Where it has not been possible to avoid jargon, then terms are explained briefly in pop-up windows.
The factsheet can be found in English and in German on the FMA website at: https://www.fma.gv.at/en/factsheet-how-do-inflation-and-the-risk-in-interest-rates-affect-my-money/
It is also available in all official languages of the European Union on the websites of the three European Supervisory Authorities:
Journalists may address further enquiries to:
Klaus Grubelnik (FMA Media Spokesperson)
+43 0 676 88249516
+43 (0)1 249 59 – 6006
[1] European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA) and European Securities and Markets Authority (ESMA)