How inflation could hurt your savings

If you have most of your cash in low interest accounts, your spending power could be slipping as prices rise faster than the value of your savings. You simply won’t be able to buy as much with your money in the future as you can now.

But investing some of your money for the long term – around five years or more – could see its value grow faster than rising prices, potentially preserving what your money’s worth.

According to the Bank of England’s inflation calculator, something that cost £10 in 2018 would now cost £12.17 in 2023. 

This means you’d need an average return of better than inflation on your money to ensure it’s keeping up with rising prices.

Although the Bank of England’s base interest rate has increased and this influences savings account interest rates, that’s hard to achieve. 

Investing has the potential to deliver inflation-beating returns, and therefore could see your money grow in line with – or faster than – inflation. 

There are risks, the value of investments can fall as well as rise depending on what’s happening in the world. But investing in a mix of assets, including bonds as well as stocks for example, could help deal with those risks. And with a service like our very own Royal Bank Invest, you can choose how much risk you’d like to take.

Also, history shows that, over time, markets generally continue to rise. That’s despite some hefty ups and downs along the way.

It’s quick and easy to start investing with our online platform Royal Bank Invest. You choose from one of five funds, decide how much you’d like to invest – anything from £50 – and whether you’d like to set up regular contributions. Then you’re done. And if you’d like a little help deciding which fund to choose, our online automated advice service could help.

Your investment is managed by experts at Coutts who do all the heavy lifting for you. Navigating changing market conditions is their job after all. They invest on your behalf in a low-cost way and make sure your investment stays at a risk level you’re comfortable with.

Whether you’re an experienced investor or just finding out what investing is, we’ve got a range of articles to help you understand more about investing.

We regularly update our articles depending on what’s happening in the market so check back for future updates.