Inflation vs your savings rate
Lesson 7 of 13 in our free Build Wealth the Boring Way guide: a 5-minute money game with the key points below.
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Questions you'll answer
£1,000 sits in a jar for 10 years while prices rise 3.1% a year. In today's money, roughly what is it worth by then?
Quick facts
- 1.5% easy-access account → Shrinking (below inflation). About −1.6% a year in real terms.
- 4% fixed for a year → Growing (beats inflation). About +0.9% a year in real terms.
- 0% in a current account → Shrinking (below inflation). Loses the full 3.1% of buying power a year.
- 3.75%, the same as Bank Rate in our pack → Growing (beats inflation). Just ahead: about +0.6% a year in real terms.
- Fact: “Cash savings can lose value in real terms even though the number never falls.” — If the rate is below inflation, the same pounds buy less each year.
- Myth: “Inflation only matters to people with big savings.” — It hits everyone's money, and small budgets feel rising prices most.
- Fact: “Cash is still the right home for an emergency fund, even if it barely beats inflation.” — Emergency money needs to be there at full value, fast. Shopping around for a better rate still helps.