A double whammy of rising inflation and low interest rates is making deeper holes in the pockets of consumers.

Anyone who keeps a majority of household savings in a deposit account suffers "negative interest rates" because inflation is outstripping the meager rates paid by banks.

China's Consumer Price Index rose 4.4 percent in October, the biggest gain in 25 months, led by increases in the cost of food.

China's central bank raised its key interest rate on October 20 for the first time in nearly three years. The benchmark one-year savings rate went up to 2.5 percent after a 0.25 percentage point hike.

However, even after the rate increase, savings returns still lag behind the living cost, with a negative interest rate of 1.9 percent.

China's central bank is widely expected to raise rates further. However, analysts say negative deposit rates will linger a while longer.

If you're fretting about your financial situation and want to keep up with rising living costs, here are some tips you may wish to consider.

Don't forget the golden principles of investment: Don't put all your eggs in one basket. Diversification is the backbone for good investment, and products that offer potentially higher returns come with higher risks.

Structured bank products

Structured wealth management products sold by banks are investments whose performance is linked with underlining assets. In most cases, they require an investment of, say, 50,000 yuan (US$7,530), and an investment period of at least three months. The products are popular among retail investors who don't want to bother with complex investment choices they don't understand. They are content to let bankers do the thinking for them.

Some products, whose principal is 100 percent guaranteed, are especially popular with risk-averse investors.

Sometimes, investment managers will tout the annualized past performance of products, but bear in mind that the past doesn't guarantee the future. One always has to be careful about believing sales hype.

There already have been lawsuits related to disputes over wealth management products from investors who claim risks were not fully disclosed. Let the buyer beware.

Zhao Xinke, a China Europe International Business School professor, offers Ask-Yourself-Four-Questions advice on buying structured banking products:

1. What's your highest return under the best circumstances?

2. What's the worst scenario you face?

3. Is there any exit option?

4. What's the cost of the investment contract?

If you can find answers to all these questions, then you can make the decision.

"Read your product contract carefully and never buy anything with a contract you don't understand," Zhao said. "Bear in mind, there's no free lunch."

Currency

Economists say they expect the yuan to rise against the US dollar in the long run.

Jing Ulrich, managing director and chairman of JPMorgan's China equities and commodities business, said she expects the Chinese currency to appreciate by 5 percent annually over the next three to five years. So retaining your assets in yuan can be a good idea.

UBS AG said in a report that Asian investors should avoid US assets because of the latest round of quantitative easing by the Federal Reserve. Quantitative easing is a euphemism for printing more money, which means a weaker greenback.

UBS suggests holding the yuan and Singaporean dollars among Asian currencies. That view is echoed by Jacky Tai, head of Treasury and Markets at DBS China, who recommends buying Asian currencies. The so-called "resource-based currencies," such as the Australian dollar, are also recommended for long-term holding though the Aussie is already near its record highs against the US dollar.

Stocks

Analysts say high inflation, a government crackdown on property investment and ample liquidity in China's economy are likely to make the stock market a good bet for investment.

Stock investing is not recommended for the faint-hearted. Markets go up and down, and share declines can be disheartening and cause panicky investors to sell out at a loss, only to see prices rise again.

It's wise to recall the bearish year of the Shanghai Composite Index, which plummeted from a high of 6,124 points on October 16, 2007, to 1,664 points on October 28, 2008. Analysts warn that investment in shares is suitable only for those who know how to access stocks and are willing to take calculated risks.

Small-cap retail investors tend to chase market rumors to make quick money, but a prudent investor pays more attention to market fundamentals and long-term trends. It's wise to know a little about companies you invest in. What are their earnings history, potential and sector prospects?

Zhang Qi, a Haitong Securities Co analyst, rates banking shares as undervalued.

"The banking sector is still neglected by investors though shares of the sector have picked up some momentum lately," Zhang said.

Banks in China are benefiting from record liquidity flows, which boost their interest income. That's why most listed banks in China posted rosy third-quarter reports.

Bank of East Asia, in a wealth management report, said current low valuations of blue chip equities provide some good buying opportunities.

At present, the prices of bank shares are about nine times to earnings. The price-earnings multiple for insurers is 19 times, while the ratio for property companies is 21 times, its lowest since 2005.

Liao Zhifeng, a fund manager at HSBC Jintrust, said he plans to raise holdings in sectors encouraged by China's 12th Five-Year Plan, including retail, electronics, software and advanced manufacturing.

Property

There's not much good news around for people who think the safest investment is buying a home for themselves. The central government has made it clear that it intends to do everything possible to deflate a bubble in the real estate market. Though speculators may be the culprit, the measures taken to rein in the market end up hurting first-time home buyers, too.

The State Council raised the down-payment minimum on second-home loans to 50 percent from 40 percent in April and added 10 percent to the interest rate on second mortgages. As home prices continued to rise, authorities fired another salvo - stopping loans to people buying third homes.

In addition to higher interest rates, other measures have also been implemented. Shanghai is among a long list of major cities where families are restricted to buying only one home "for a certain period of time." Expatriates are also limited to just one unit purchase.

Gold

Gold, of course, is the classic hedge against inflation.

Analysts said the precious metal is expected to rise strongly next year, but investors should be cautious about jumping on bandwagons to chase rising prices.

"We're still positive on gold's performance and expect it to hit a new high next year as a weak dollar supports the precious metal to glitter further," said David Leung, general manager of wealth management at Standard Chartered Bank. "However, investors should be really cautious on buying at the current high prices."

Gold rose to a record of US$1,402.80 an ounce earlier in November as investors became jittery about new stimulus measures from the Federal Reserve to bolster a faltering United States economy. The Fed's new US$600 billion asset-buying program has drawn global scorn because of concerns it will release a flood of cheap money into the world economy without doing much to reinvigorate a lackluster US recovery.

Leung said he expects gold to rise to US$1,475 an ounce in the third quarter of next year.

Leung said short-term fluctuations and profit-taking are likely to occur, but investment opportunities may open up if the metal drops below US$1,300.

Gold investment in China includes bullion and coins. The precious metal is available at commercial banks, jewelers and gold wholesalers such as China Gold, the country's biggest gold miner.

Global gold demand this year is expected to rise from 2009 on stronger demand from China and India, the World Gold Council has said.

Bonds and bond funds

A bond is an IOU. The issuer typically is obliged to pay interest (the coupon) to the lender and to repay the principal at a fixed maturity.

T-bonds are popular among average investors in China, while corporate bonds are also gaining attention from more retail investors. If you don't want to bother with individual bonds, you can also buy bond fund products.

A bond fund is a unit trust that invests in bonds, usually with the objective of providing stable returns.

When official interest rates go up, bond prices drop. Bond yields typically rise in an inflationary environment because bondholders don't want their returns to be undercut by higher prices so they demand higher interest to buy bonds.

Standard Chartered Bank's Leung suggests reducing bond holdings in the current interest rate cycle because rising deposits rates will cut the attractiveness of bonds and because the interest rate on bonds today is likely to be eclipsed by the rate offered on bonds in the future.