6 ways to protect your purchasing power
Inflation — the increase in the cost of goods and services over time — impacts your purchasing power. As prices rise, your dollars don’t buy as much as they used to.
According to the March inflation report from the Bureau of Labor Statistics (BLS), prices rose 3.26% over the previous year, largely driven by a spike in gas prices.
During periods of high inflation, it’s important to be strategic about where you park your cash. Choosing the right accounts and investments can help protect the value of your money and hedge against rising costs.
What is an inflation hedge?
An inflation hedge is an asset, account, or strategy that protects your money against rising prices by helping retain its value or increase in value over time. The point of an inflation hedge is to provide stability even during periods of economic downturns and market volatility.
6 best hedges against inflation
Inflation hedges are not completely risk-free, but they do offer the chance to protect your purchasing power and maintain the value of your money. Here’s a look at some of the best options.
1. Gold
Gold is often touted as a safe-haven asset because its value tends to rise even in times of uncertainty. It can also provide a hedge against inflation because there is a limited amount of this asset available — unlike the amount of cash in circulation (or government-issued currency), which can be increased if the government decides to print more.
Read more: Gold forecast and tracker: Where prices could land in 2026
2. High-yield bank accounts
Certain accounts, such as high-yield savings accounts (HYSAs) and certificates of deposit (CDs), can help you secure competitive interest rates that outpace inflation. In fact, it’s possible to find both HYSAs and CDs that currently earn as much as 4% APY.
Plus, as long as you choose a bank that’s federally insured, your deposits are protected against loss (up to $250,000 per depositor, per institution, per ownership category) in the event the bank fails.
Read more: How inflation affects savings: Here’s the interest rate you need to beat
3. Treasury Inflation-Protected Securities
Often referred to as “TIPS,” these government bonds are tied to the Consumer Price Index (CPI) and are backed by the full faith of the U.S. government. The principal increases with inflation and decreases with deflation, and interest is paid out every six months.
TIPS are offered in terms of five, 10, and 30 years. Investors are guaranteed to receive at least the full principal amount they originally invested when their bond matures, which can provide some form of financial security in the event of an economic downturn.
Read more: What to do when your wages aren’t keeping up with the cost of living
4. Series I bonds
Series I bonds are a type of U.S. savings bond designed specifically to protect your purchasing power from inflation.
Issued by the U.S. Department of the Treasury, I bonds earn a composite interest rate made up of two parts: a fixed rate that stays the same for the life of the bond, and a variable rate that adjusts every six months based on changes in the CPI.
When inflation rises, the variable portion increases, boosting your overall return; when inflation falls, the rate adjusts downward. Because the bond’s value is tied to inflation, it helps preserve the real (inflation-adjusted) value of your savings over time.
Read more: I bond vs. high-yield savings account: Which is better for beating inflation?
5. Real estate
When prices for everyday goods increase, the same often happens with property values and rents. This is why investing in real estate can be a smart way to hedge against inflation.
You don’t have to invest directly in a property, either. You can gain exposure to the real estate market by investing in real estate investment trusts (REITs). These are companies that own, operate, or finance income-producing properties. These trusts can be especially beneficial if housing inventory is low and direct ownership isn’t an option.
6. Commodities
Gold isn’t the only commodity that can serve as an inflation hedge. Oil, gas, agricultural products, and other metals can be worthwhile investments as inflation remains elevated.
Not only do they have intrinsic value because they are physical assets, but also commodities typically increase in value over the long-term because of the role they play in the production and distribution of everyday goods.
