1 · Your savings grew
Your savings account pays 2% interest. You put in £100.
A year later, you've got £102. You've made money. You haven't lost a penny.
So are you better off?
2 · Where did two tins go?
Say a tin of beans cost £1 last year. Your £100 could buy 100 tins.
This year, the same tin costs £1.04.
Your £102 now buys only 98 tins.
£2 more, but 2 fewer tins. Nothing came out of your account: the tins got more expensive faster than your savings grew. That's inflation.
your turn
3 · What the 4% on the news means
Inflation is how fast prices are rising. When the news says inflation is 4%, prices are, on average, 4% higher than a year ago.
On average: some things rise more, some less. Bread up 6%, milk up 2%, beans up 4%. Your own costs can rise faster or slower than the headline.
Your bank kept its promise: 2% interest, £100 to £102.
But it never promised your money would still buy the same amount of things.
4 · The one-line check
So how much buying power are savings losing? The quick way: subtract inflation from your savings rate.
With the beans: 2% − 4% = −2%. The gap between the bars is what you lose.
Roughly 2 tins lost in every 100 you could buy before.
your turn
5 · With real numbers
In September 2026, UK inflation was 3.5%.
The average rate on existing easy-access savings was 1.66%. 1.66 − 3.5 ≈ −1.8%.
If those rates held for a year, those savings would lose nearly 2% of their buying power: nearly 2 tins in every 100.
But new fixed-term deals averaged 4.42%. 4.42 − 3.5 ≈ +0.9%.
At those rates, savings would gain a little buying power: nearly one tin more in every 100.
6 · Why keep money that's losing?
So why would anyone keep money in an account that's losing value? Sometimes it's the right place.
Your emergency money has to be there the day you need it: the day the car breaks down and the bill arrives.
Losing a little buying power can be worth that security.
But money that isn't for emergencies, that you won't need for a while: could it be earning more elsewhere? A fixed term usually pays more because your money is locked away.
7 · Check yours today
Open your banking app and find your savings interest rate.
Look up the latest inflation figure. The ONS publishes it every month, and the news reports it.
Subtract it from your rate. Negative: your savings aren't keeping up with inflation. Positive: they're ahead of it.
It's not a guarantee of what happens next year: rates and prices change every month. But it's a useful starting point. Do the sum with your own numbers ↓
The question isn't just how much money you've got.
It's how much it can buy.