You've probably noticed your grocery bill creeping up, your rent increasing, or that coffee costing a bit more than it used to. That's inflation doing its thing—slowly eroding the purchasing power of every dollar you've saved. The money sitting in your bank account today will buy less stuff tomorrow.

Here's the uncomfortable truth: if your investments aren't growing faster than inflation, you're actually losing ground. A savings account earning 0.5% while inflation runs at 4% means you're getting poorer in real terms. So what can you do about it? Let's look at three investment options specifically designed to help your money keep pace with rising prices.

I Bonds are one of the simplest inflation-fighting tools available to individual investors. Issued by the U.S. Treasury, these savings bonds have a unique feature: their interest rate adjusts every six months based on the Consumer Price Index. When inflation goes up, your I Bond rate goes up automatically. No action required on your part.

The mechanics are straightforward. I Bonds pay a composite rate made up of two parts—a fixed rate that stays the same for the life of the bond, plus an inflation rate that changes with the CPI. During high inflation periods, this can result in surprisingly attractive returns. During the 2022 inflation spike, I Bonds were paying over 9% annually.

There are some limitations to know about. You can only purchase $10,000 worth per person per year through TreasuryDirect.gov (plus another $5,000 if you use your tax refund). You must hold them for at least one year, and if you cash out before five years, you forfeit three months of interest. But for money you can set aside, I Bonds offer a government-backed, inflation-adjusted return with zero risk of losing your principal.

Takeaway

I Bonds automatically adjust to inflation without any effort from you, making them one of the most set-it-and-forget-it inflation hedges available to individual investors.

Treasury Inflation-Protected Securities—TIPS for short—are another government-issued option, but they work differently than I Bonds. With TIPS, the principal value of your bond actually increases with inflation. If you buy a $1,000 TIPS and inflation runs 3% that year, your principal adjusts to $1,030. The interest payments you receive are calculated on that higher amount.

TIPS trade on the open market, which makes them more flexible than I Bonds. You can buy and sell them any time, purchase them through regular brokerage accounts, or access them easily through TIPS mutual funds and ETFs. This liquidity makes them practical for larger allocations in your portfolio. Many investors hold TIPS as 10-20% of their bond allocation specifically for inflation protection.

One thing to understand: TIPS can actually lose value in the short term if real interest rates rise. Their market price fluctuates based on rate expectations. This doesn't matter if you hold to maturity—you'll get your inflation-adjusted principal back. But if you need to sell early during a rising rate environment, you might get less than you paid. For this reason, TIPS work best as a long-term holding, not a short-term trade.

Takeaway

TIPS protect your purchasing power by adjusting your principal for inflation, but think of them as a long-term portfolio anchor rather than something you trade in and out of.

Beyond government securities, real assets—things you can touch—have historically provided inflation protection. The logic is intuitive: when the price of everything goes up, the price of physical stuff tends to go up too. A barrel of oil, a bushel of wheat, or an apartment building all become more expensive in nominal terms during inflationary periods.

Real estate is the most accessible real asset for most investors. You might own your home already, which naturally provides some inflation hedge on your housing costs. Beyond that, Real Estate Investment Trusts (REITs) let you invest in commercial property, apartment complexes, and other real estate without buying buildings yourself. During inflation, landlords typically raise rents, which flows through to REIT dividends.

Commodities are trickier. You probably don't want actual barrels of oil in your garage. Commodity ETFs and funds provide exposure, but they come with complications—storage costs, futures contract rolling, and sometimes poor tracking of actual commodity prices. For most individual investors, a small allocation to a broad commodity fund can serve as portfolio insurance during inflationary spikes, but it shouldn't be a core holding. Real estate tends to be the more practical long-term inflation hedge for everyday investors.

Takeaway

Real assets like property tend to rise with inflation because their replacement cost increases—owning things that become more expensive to produce is a natural hedge against rising prices.

Protecting your purchasing power doesn't require complex strategies or exotic investments. I Bonds and TIPS offer government-backed, inflation-adjusted returns that automatically respond to rising prices. Real estate provides a tangible hedge that most people can access through REITs or homeownership.

The key is building some inflation protection into your portfolio before you need it—not scrambling to react after prices have already jumped. Start small. Even modest allocations to these assets can help ensure that the money you're saving today still buys something meaningful tomorrow.