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Time to save – or time to invest? ING expert economist Philippe Ledent offers his advice

09:45 19/05/2023
In association with ING Belgium

When your income allows it, it can be interesting to put some of it aside. You might want to make a major purchase in the future, or smooth consumption over time – remember that income evolves over a lifetime – or to pass on an inheritance to the next generation. Unfortunately, as time goes by, rising prices, and therefore inflation, threaten the purchasing power of that money. So what to do? 

The return the money can offer is crucial, as it should make it possible to maintain, or in the best case improve, your future purchasing power. However, the return will vary depending on what you do with the money. The key is to take into account both the expected return and the risk. And of course, the two are often linked: accepting more risk means a potentially higher expected return.

After a long period of very low inflation, the huge wave of inflation we are currently experiencing is eating more than usual into the value of money set aside. For example, the consumer price index, which is the best indicator of the general price evolution in Belgium, has increased by more than 15% since the beginning of 2021. As a result, €1,000 at the beginning of 2021 only had a purchasing power of €870 at the beginning of 2023!

This higher inflation has led to an increasingly strong reaction from the European Central Bank, as it has with most central banks. To fight inflation, it has significantly increased its key rates, so that all interest rates in the financial markets, and to some extent in banking products, have increased. This is the case for the rates on savings accounts.

It’s true that the yields on banking products and most financial assets are currently not sufficient to compensate for the high inflation. But inflation should gradually come down, which should improve the situation. It is therefore a good thing that after many years in which only equities offered a relatively attractive return, the current period offers several alternatives in terms of investments  with a decent potential return. So what should we do in 2023?

-        Whatever you decide, it is advisable to keep about six months’ income in savings, so you have the necessary liquidity quickly available for life’s contingencies. Beyond that, you can think about investing, particularly in the financial markets.

-        Both equity and bond markets suffered last year. Now it looks as if interest rates are approaching their peak, which should make bonds more attractive (indeed, their value decreases as long as rates are rising). Furthermore, following their correction in 2022, equity markets have become “cheaper”, which is an investment opportunity, certainly in a medium- to long-term perspective. In short, the investor has the choice to spread their investments across the different assets.

-        Those who are not interested in the financial markets, or do not want to actively manage their investments, can opt for investment funds, which will be actively allocated between the different asset classes. This makes it easy to benefit from a diversified portfolio that is better able to cope with the ups and downs of the economy and the financial markets.

On the one hand, inflation is eroding the value of any money set aside more than usual. But on the other hand, savers and investors are now facing more normal interest rate conditions and, above all, they have investment alternatives. This has not really happened for more than 10 years!

The terms and conditions applicable to ING Belgium’s savings products (general and specific terms and conditions, regulations, key information for savers, product sheets, charges and any other additional information) are available in ING branches, at or by calling 02 464 60 04 (Eng) or 02 464 60 02 (Fr)

This article was first published in ING Belgium's Expat Time digital magazine, spring 2023

Written by The Bulletin in association with ING Belgium