The wealth landscape has not been this tough for many years. Inflation is perhaps the trickiest issue for wealth growth right now, but interest rates have an effect too. Plus, the radical risk of geopolitical trouble has the effect of compounding both of these problems.


Inflation is a problem we’ve not had to deal with in more than a decade. Since the financial crisis of 2008-2009 levels of inflation have, in historical terms, been extremely low.

But it has bounced back with a vengeance in the wake of the pandemic. At the time of writing CPI inflation is at 7.0% – its highest level in 30 years.

The effect of inflation on wealth is simple – if your assets are growing more slowly than the rate of inflation, then in real terms they are diminishing in value.

While it is recommendable to keep a certain amount of wealth in cash for rainy day emergencies, particularly in light of the rising cost of living, anything beyond that should be working harder elsewhere.

Savings rates in cash accounts are rising but are still well below inflation. The current top easy access account comes from Chase Bank at 1.5%.

While inflation is currently high on paper, averaged over many years, the level looks a lot more manageable. In the past 30 years inflation has averaged 2.8%, according to the Bank of England.

With this in mind, the goal of beating inflation over time seems far less unwieldly, through careful investments.

Interest rates

Interest rates have two key impacts on long-term wealth. The first is on debts.

Any kind of debt that is unsecured – be it via credit cards or variable rate mortgages – will get more expensive as rates rise. This makes wealth building harder, because you’ll have less money each month to put away.

In that context, credit cards should be paid down as quickly as possible, and variable rate mortgages should be fixed to protect you against further rate hikes.

Interest rates also affect investments. Riskier investments such as stocks tend to start performing less well when rates go up. This is because as rates rise the yield on bonds – Government and company debts – increase and become more attractive to investors.

But this risk is manageable with careful wealth and investment management, which can blend the best approach for the climate.

Wealth building

Ultimately, despite the twin risks of inflation and interest rates rising, it’s still possible to build wealth over the long term. Considerations of course need to be made, but adjustments are part of the process, and sticking to a course over time will still yield significant benefits.

Of course, with geopolitical catastrophes such as the war in Ukraine, things can look pretty bleak in the short term. But it is essential that anyone interested in building their wealth for the future, should focus on the long-term benefits and goals, rather than worry over short-term issues.

If you’d like to discuss any of the issues raised in this article, don’t hesitate to get in touch with your financial adviser.