High inflation is a pressing economic issue that affects individuals and nations alike. As such, it’s a topic that frequently appears in IELTS Writing Task 2 prompts. Based on recent trends, we can expect to see questions related to savings strategies during high inflation periods in future IELTS exams. Let’s explore a sample question and analyze how to approach it effectively.
Some people believe that during times of high inflation, it is better to spend money rather than save it. To what extent do you agree or disagree with this statement?
Analyzing the Question
This question asks for your opinion on a financial strategy during high inflation. It’s important to:
- Clearly state your position
- Provide reasons and examples to support your view
- Consider counterarguments
- Conclude by restating your position
Now, let’s look at sample essays for different band scores.
Sample Essay 1 (Band 8-9)
In times of economic uncertainty, particularly during periods of high inflation, the question of whether to save or spend money becomes increasingly pertinent. While some argue that spending is preferable to saving when inflation is high, I firmly disagree with this stance. I believe that maintaining a balanced approach to saving, even in inflationary times, is crucial for long-term financial stability and security.
Firstly, saving money, regardless of the economic climate, provides a financial buffer against unforeseen circumstances. High inflation does not negate the importance of having an emergency fund. In fact, it could be argued that such savings become even more critical during economically turbulent times when job security may be compromised. A well-maintained savings account can offer peace of mind and financial flexibility, allowing individuals to weather unexpected expenses or income disruptions without resorting to high-interest debt.
The impact of inflation on retirement planning is another crucial factor to consider. While inflation may erode the purchasing power of saved money, completely foregoing savings can have devastating long-term consequences, particularly for retirement planning. Instead of abandoning saving altogether, individuals should explore inflation-resistant savings options such as index-linked bonds or diversified investment portfolios that have the potential to outpace inflation over time.
Moreover, the argument for spending during high inflation often assumes that all spending is equal. However, frivolous spending on non-essential items is rarely a wise financial strategy, regardless of the economic environment. If one chooses to spend rather than save during inflationary periods, it should be done strategically, focusing on investments that have the potential to appreciate in value, such as real estate or education, which can serve as hedges against inflation.
How to manage inflation in developing economies also highlights the importance of maintaining savings. In many developing nations, where economic volatility can be more pronounced, personal savings act as a crucial stabilizing force, both for individuals and for the broader economy. Encouraging a culture of saving can contribute to economic resilience and reduce dependence on external financial aid during crises.
In conclusion, while high inflation presents challenges to savers, completely abandoning the practice of saving in favor of spending is short-sighted and potentially harmful. A more nuanced approach that balances strategic spending with prudent saving and investing is likely to yield better long-term financial outcomes. By maintaining this balance, individuals can protect themselves against both the erosive effects of inflation and the uncertainties of economic fluctuations.
Analysis of Band 8-9 Essay
This essay demonstrates excellence in several key areas:
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Task Achievement: The essay fully addresses all parts of the task, presenting a clear position with fully extended and well-supported ideas.
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Coherence and Cohesion: Ideas are logically organized with clear progression throughout. The use of paragraphing is skillful and each paragraph has a clear central topic.
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Lexical Resource: The essay uses a wide range of vocabulary with very natural and sophisticated control of lexical features. Key terms like “financial buffer,” “inflation-resistant savings options,” and “hedges against inflation” showcase advanced vocabulary relevant to the topic.
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Grammatical Range and Accuracy: A wide range of structures is used with full flexibility and accuracy. The essay demonstrates consistent control of complex language.
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Development of Ideas: Each main point is well-developed with clear reasoning and supportive examples. The essay considers multiple perspectives on the issue.
Sample Essay 2 (Band 6-7)
The question of whether to save or spend money during high inflation is a complex one. While some people think spending is better in these times, I partially disagree with this idea. I believe that a balanced approach, including both saving and smart spending, is the best strategy during high inflation.
Firstly, saving money is always important, even when inflation is high. Having savings gives people a safety net for emergencies. If someone loses their job or has unexpected expenses, having some money saved can be very helpful. Even though inflation might reduce the value of savings over time, having no savings at all is much riskier.
However, it’s true that keeping all money in savings during high inflation isn’t the best idea. The value of money in a basic savings account will decrease as prices go up. This is why people should consider other ways to save or invest their money. For example, they could buy government bonds that are protected against inflation or invest in stocks that might grow faster than the inflation rate.
Central bank’s role in economic recovery is also important to consider. Central banks often raise interest rates to fight inflation, which can make saving more attractive. Higher interest rates on savings accounts can help offset some of the effects of inflation.
On the other hand, some spending during high inflation can be smart. Buying long-lasting goods or making home improvements can be good investments. These things might increase in value or at least keep their value better than money in a low-interest savings account. Also, if someone knows they will need to make a big purchase soon, it might be better to buy it now before prices go up more.
In conclusion, I believe that the best approach during high inflation is to balance saving and smart spending. People should try to keep some savings for emergencies, look for ways to protect their money from inflation, and make wise purchases when it makes sense. This balanced strategy can help people manage their money better during difficult economic times.
Analysis of Band 6-7 Essay
This essay demonstrates good control of language with some areas for improvement:
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Task Achievement: The essay addresses the main parts of the task and presents a clear position. However, the ideas could be further developed and supported.
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Coherence and Cohesion: The essay is generally well-organized with clear overall progression. Paragraphing is sufficient but could be more skillful.
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Lexical Resource: There is a good range of vocabulary, though it’s less sophisticated than the Band 8-9 essay. Phrases like “safety net for emergencies” and “long-lasting goods” are appropriate but not as advanced.
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Grammatical Range and Accuracy: A mix of simple and complex sentence forms is used with good control. There are no significant errors, but the range is not as wide as in the higher band essay.
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Development of Ideas: Main ideas are relevant and supported, but the level of detail and explanation is not as thorough as in the Band 8-9 essay.
Key Vocabulary to Remember
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Inflation (noun) – /ɪnˈfleɪʃən/ – A general increase in prices and fall in the purchasing value of money.
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Purchasing power (noun phrase) – /ˈpɜːrtʃəsɪŋ ˈpaʊər/ – The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy.
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Diversify (verb) – /daɪˈvɜːrsɪfaɪ/ – Spread investments among different asset types to reduce risk.
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Hedge against inflation (phrase) – /hedʒ əˈɡenst ɪnˈfleɪʃən/ – An investment that is likely to retain or increase its value over a specified period.
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Index-linked bonds (noun phrase) – /ˈɪndeks lɪŋkt bɒndz/ – Bonds whose principal is adjusted in line with a price index to protect investors from inflation.
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Erode (verb) – /ɪˈroʊd/ – Gradually destroy or diminish.
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Financial buffer (noun phrase) – /faɪˈnænʃəl ˈbʌfər/ – Money set aside as protection against financial difficulties.
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Economic volatility (noun phrase) – /ˌiːkəˈnɒmɪk ˌvɒləˈtɪləti/ – Rapid and unpredictable changes in the economy.
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Appreciating assets (noun phrase) – /əˈpriːʃieɪtɪŋ ˈæsets/ – Assets that increase in value over time.
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Strategic spending (noun phrase) – /strəˈtiːdʒɪk ˈspendɪŋ/ – Carefully planned expenditure to achieve specific financial goals.
Conclusion
The topic of savings strategies during high inflation is likely to remain relevant in future IELTS exams. To prepare effectively, practice writing essays on related topics such as:
- The role of government in managing inflation
- The impact of inflation on different socio-economic groups
- Comparing inflation management strategies in developed and developing countries
Remember to structure your essay clearly, use a range of vocabulary and grammatical structures, and support your arguments with relevant examples. Practice writing your own essay on this topic and consider sharing it in the comments section for feedback and discussion.
Role of government spending in economic recovery is another related topic you might want to explore to broaden your understanding of economic issues often discussed in IELTS Writing Task 2.