Inflation Isn’t Always Loud
You might not feel it right away, but inflation has a sneaky way of eating into your money.
One year, your weekly shop costs £70, the next it’s creeping toward £90. Same basket, less bang for your buck. It’s not a financial crash or a headline-making event, but over time, inflation quietly chips away at the real value of your savings.
And if you’re not paying attention, it can seriously disrupt your financial plans.
How Inflation Works Behind the Scenes
At its very core, inflation means prices are rising. Usually slowly, sometimes sharply. When this happens, every pound you’ve saved buys a little bit less.
Think about it like this: you’ve saved £10,000 for a rainy day. If inflation is running at around 2.6%, down from peaks above 10% in 2022, and your savings account earns just 2%, then in real terms, your money is still losing value. You’re earning interest but losing purchasing power. Over a few years, that gap adds up.
This isn’t just a theoretical thing, it’s your petrol bill, your insurance renewal, the cost of a train ticket. All of it quietly creeping up.
Why It’s Worse for Savers
Savings accounts feel safe. They’re familiar. You can see the numbers, and the balance doesn’t go down. But that security can be misleading.
When inflation is higher than your interest rate, and in recent years it often has been, you’re going backwards. Especially when you factor in tax on savings interest, or if your account isn’t even beating 2–3%. It’s like leaving your money out in the rain with no umbrella.
Older savers or those approaching retirement often feel this most. If you’re relying on a fixed pot of money, inflation isn’t just a nuisance. It’s a real threat to your financial stability.
Is Your Money Going Backwards?
Let’s do a bit of quick maths.
Imagine you’ve got £100,000 tucked away. You don’t touch it. Inflation sits at 4% a year, and your interest rate is 2%. That gap might not sound dramatic, but in just 10 years, your money’s real-world value could shrink by over £20,000.
That could mean the difference between a few extra holidays in retirement or holding off on helping your children with a deposit.
This is the part many people miss. The number in the bank account hasn’t changed. But what it can do for you has.
Simple Strategies That Help You Stay Ahead
The good news? You don’t need to overhaul everything. But there are smart moves you can make.
- Use your tax wrappers. ISAs and pensions grow tax-free, which helps more of your money work for you over time. Make the most of your allowances every year.
- Think long-term, not just short-term. Holding some cash for emergencies makes sense. But beyond that, investing in assets that have the potential to grow, like funds or shares, gives your money a chance to beat inflation.
- Diversify. A mix of different investments can help you ride out the ups and downs. You don’t need to go all-in on one thing, and you don’t need to predict the next market move. Some investors also consider real-asset hedges such as UK index-linked gilts (ILBs) or commodities, which may offer better protection in inflationary periods.
- Review your savings. Are your rates competitive? Is your cash working hard enough? A better deal, even by 1%, can make a noticeable difference over time.
The key is to act and not to overreact. You’re not trying to win big in the lottery, it’s just about protecting what you’ve built. These strategies can help you build resilience into your finances. But with inflation touching everything from your grocery bill to your retirement fund, that’s where expert guidance can make the difference.
The Role of a Financial Adviser in All This
Dealing with inflation isn’t just about chasing returns. It’s about having a plan and knowing when to adjust it.
A financial adviser can help you balance risk and reward, spot opportunities, and avoid the classic pitfalls. Like reacting to short-term market dips or leaving too much money in low-yield savings accounts.
They’ll also keep your goals front and centre. Because beating inflation doesn’t just mean staying ahead of the numbers. It means keeping your lifestyle, your plans, and your confidence intact.
Don’t Let It Nibble Away at Your Goals
Inflation isn’t going anywhere. But that doesn’t mean it has to eat into your future.
With the right mix of action, advice, and awareness, you can stay in control and make sure your money keeps working just as hard as you did to earn it.
If you’re not sure how inflation is affecting your plans or whether your savings are doing enough, now is a good time to check in.
📞 Call us on 020 8366 4400
📧 Or email enquiries@cedarhfs.co.uk to start a conversation.