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More than four in five people (83%) expect inflation to hit their personal finances in the next five years, according to research from Yorkshire Building Society. One of the most damaging effects of inflation is the way it can erode your savings.
Even if inflation were to sit at around 2% (the Bank of England’s target), it would only take 36 years for the value of your savings to halve.
Over the past few years, the rate of inflation has been far higher than this; UK inflation peaked at 11.1% in October 2022. At this elevated level, it would only take around six and a half years for the value of your money to halve.
While investing can be a good way to beat inflation over the long run, we all need to hold a decent amount of cash for day-to-day spending, short-term savings goals and emergencies.
One of the best ways to protect the value of your cash is to find a savings account that offers real returns. Although this is becoming more difficult (as interest rates have come down while inflation has gone up), there are still inflation-busting rates on the market.
Analysis from Moneyfacts, conducted last month, showed 956 accounts were still offering inflation-beating rates in August.
