Inflation in the Czech Republic has been on the rise since last year, and its annual rate is still in the double digits. This is a concern for Czech citizens who are now looking for ways to save their money or invest it wisely to minimize the impact of inflation. However, the offer of conservative savings products in the country is limited, which makes finding the right investment products challenging.

One option for Czech savers is to use standard savings accounts or short-term deposits. These accounts have an interest rate of between five and six percent per year, but this rate drops after a certain amount. Money market mutual funds or short-term investment funds are also conservative investment tools recommended by experts. These tools offer significantly higher long-term interest rates than ordinary savings accounts and provide high liquidity.

However, those who want higher returns must invest elsewhere, ideally in stocks, and be prepared to accept higher risks. Stocks on the Prague Stock Exchange lost nearly 16 percent last year, so this option is not without risks. Conservative savings will not protect individuals from inflation, and obtaining a risk-free yield with the required liquidity above the inflation rate is impossible.

Despite this, conservative savings products are still essential for managing shorter-term reserves, and people need to carefully consider the role of these products in their portfolio. A contingency reserve needs to be secured, along with other goals that require a shorter-term reserve. All other reserves should be managed in other instruments with the potential for higher returns.

People in the Czech Republic are gradually adjusting their savings strategies to account for inflation risk. Financial advisors suggest diversifying portfolios and investing in instruments with higher potential returns for the long-term. As interest rates have been stable for some time, managing a contingency reserve or temporarily increasing funds intended for the near future should remain the primary goal of conservative savings products.

Article by Prague Forum