One of the ways of illustrating this is through a simple calculation known as the 'Rule of 72'.

The rule of 72 allows you to calculate how quickly inflation erodes your buying power. The most recent CPI figure suggests an inflation rate of 5.9 percent meaning that if you put your money under the proverbial mattress and do not enjoy any growth on that money, your purchasing power will half every 12 years (72 ? 5.9 = 12). Put simply, the R1 you have today will be buy whatever 50c buys you in today?s terms.

This highlights the risk of your investments not keeping pace with inflation or, in this case, withdrawing the interest for income.

Safest investment decision you can make

What this draws attention to is that exposing your money to growth assets (equities and property) and taking on some risk in exchange for inflation beating returns could be the safest investment decision you could make.

Practically what this means is constructing a portfolio of asset classes that will provide you with your income needs both now and into the future whilst observing the inflationary pressures as well as ensuring that this is achieved with as little risk and as much certainty as possible.

One of the ways this can be achieved is by investing in a Collective Investment Scheme (e.g. a Unit Trust or Linked Investment Service Provider (LISP)) as you may still benefit from certain interest exemptions and enjoy full liquidity of your funds. Within these structures you would have exposure to a number of asset managers, funds and asset classes.

Each investor will have unique needs relating to this and should therefore consult with a Certified Financial Planner to ensure your best chance at investment success.

acsis Limited is an authorised financial services provider. The response to the question covers some of the issues in a general and factual manner and does not constitute advice. It is important to consult with a financial planner who, after an analysis of the individuals? personal needs, goals and circumstances, will be able to provide comprehensive and appropriate advice.