How does inflation impact my savings?

Inflation reduces the purchasing power of your money over time. As the cost of goods and services rises, your savings will buy less than before. If you keep money in a low-interest savings account, inflation can erode its value, especially if the account’s interest rate doesn’t keep up with inflation. This means your savings lose value year after year. For example, if inflation is at 3% and your savings account offers only 1% interest, you’re effectively losing 2% of your purchasing power annually. To combat this, it’s important to invest in assets that tend to outperform inflation, such as stocks or real estate.