Rupiah Weakens and Inflation Erodes Savings: How to Safely Protect Wealth?
JAKARTA, KOMPAS.com - Storing money in a savings account is no longer a guarantee for preserving the value of wealth. Amid inflation and the weakening exchange rate of the rupiah, people’s purchasing power is gradually eroded, even when the nominal balance appears stable.
Financial planner and Founder of Finante.id, Rista Zwestika, states that the real value of money can diminish each year if it is merely kept in cash or low-interest savings. This is particularly influenced by domestic inflation and the depreciation of the rupiah.
From the inflation perspective, when the rate of price increases is around 4-5% per year, while savings interest is only about 1-2%, the real value of money experiences a decline.
As an illustration, savings of Rp 100 million with 2% interest, while inflation is 5%, means the real value of the money decreases by about 3% in one year. Thus, the equivalent purchasing power becomes Rp 97 million.
Pressure on the value of money does not only come from domestic inflation. The weakening of the rupiah against the US dollar also amplifies the risk of wealth depreciation, especially for imported goods and global assets.
In such a situation, Rista emphasises that conventional savings still have an important role, but not as an investment tool. Savings are more suitable for liquid needs such as emergency funds, daily transactions, and short-term requirements.
Conversely, savings are not ideal for preserving the value of wealth or long-term investments because the interest is generally below inflation, thus gradually eroding the value of money.
“Still relevant, but with a different function. Savings should be for emergency funds, short-term liquid needs, and daily transactions. Not for maintaining the value of wealth and long-term investments,” she explains.
For example, instruments like gold serve as a hedge against inflation and global uncertainty.
US dollar-based assets act as protection against rupiah weakening. Meanwhile, shares offer potential long-term income growth, and Government Securities (SBN) provide stability and fixed income.
“Diversification is important because each asset has different characteristics and does not move in the same direction,” Rista clarifies.