Inflation effects ‘often not appreciated’

Consumers often fail to appreciate the effects inflation can have on their finances, which could have serious consequences.

This was the message of co-director of Ark Financial Planning Phil Perry, who observed: "There are probably a lot of people who don't really understand the effects of inflation. You can speak to a lot of people but they don't understand the issues."

This can mean people continuing to spend carelessly without realising the impact this can have on their finances, he warned.

Increased debt may be one consequence of this as people find they have less money to pay off what they already owe and borrow more to try to maintain their lifestyle.

Recent months have seen the Consumer Prices Index rate of inflation falling, with the current rate being 3.6 per cent, 1.6 per cent lower than the recent peak of 5.2 per cent in September 2011.

However, this is still well above the target figure of two per cent set by the treasury.

By Joe White