Inflation (the increase in the cost of goods and services over time) affects your purchasing power. As prices rise, your dollars don’t buy as much as before.
According to the Bureau of Labor Statistics (BLS) March inflation report, prices increased 3.26% from a year ago, driven largely by an increase in gas prices.
During periods of high inflation, it is important to be strategic about where to park your cash. Choosing the right accounts and investments can help protect the value of your money and guard against rising costs.
What is an inflation hedge?
An inflation hedge is an asset, account, or strategy that protects your money against rising prices by helping it retain its value or increase in value over time. The goal of an inflation hedge is to provide stability even during periods of economic downturns and market volatility.
6 best hedges against inflation
Inflation hedges are not completely risk-free, but they offer the opportunity to protect your purchasing power and maintain the value of your money. Here’s a look at some of the best options.
1. gold
Gold is often touted as a safe haven asset because its value tends to rise even in times of uncertainty. It can also provide a hedge against inflation because there is a limited amount of this asset available, unlike the amount of cash in circulation (or government-issued currency), which can increase if the government decides to print more.
Read more: Gold Forecast and Tracker: Where Prices Could Land in 2026
2. High-yield bank accounts
Certain accounts, such as high-yield savings accounts (HYSAs) and certificates of deposit (CDs), can help you earn competitive interest rates that beat inflation. In fact, it is possible to find both HYSA and CDs currently earning up to 4% APY.
Additionally, as long as you choose a bank that is federally insured, your deposits will be protected against loss (up to $250,000 per depositor, per institution, per ownership category) if the bank fails.
Read more: How inflation affects savings: here is the interest rate you must exceed
3. Treasury Inflation-Protected Securities
Often referred to as “TIPS,” these government bonds are linked to the Consumer Price Index (CPI) and are backed by the full faith of the U.S. government. The principal increases with inflation and decreases with deflation, and interest is paid every six months.
TIPS are offered for terms of five, 10 and 30 years. Investors are guaranteed to receive at least the full amount of principal they originally invested when their bond matures, which can provide some form of financial security in the event of an economic downturn.
Read more: What to do when your salary isn’t keeping up with the cost of living
4. Series I Bonds
Series I bonds are a type of American savings bond specifically designed to protect your purchasing power from inflation.
Issued by the U.S. Treasury Department, I bonds earn a compound interest rate made up of two parts: a fixed rate that remains the same for the life of the bond and a variable rate that adjusts every six months based on changes in the CPI.
When inflation increases, the variable portion increases, which increases your overall performance; When inflation falls, the rate adjusts downward. Because the value of the bond is linked to inflation, it helps preserve the real (inflation-adjusted) value of your savings over time.
Read more: I Bond vs. High Yield Savings Account: Which is Better to Fight Inflation?
5. Real estate
When the prices of everyday goods rise, so do property values and rents. That’s why investing in real estate can be a smart way to protect yourself against inflation.
It is also not necessary to invest directly in a property. You can gain exposure to the real estate market by investing in real estate investment trusts (REITs). These are companies that own, operate or finance income-producing properties. These trusts can be especially beneficial if housing inventory is low and direct ownership is not an option.
6. Raw materials
Gold is not the only commodity that can serve as a hedge against inflation. Oil, gas, agricultural products and other metals can be valuable investments as inflation remains high.
Not only do they have intrinsic value because they are physical assets, but raw materials often increase in value over the long term due to the role they play in the production and distribution of everyday goods.