Is your savings account keeping up with inflation?

Your savings can be earning interest and still lose some of their spending power over time.

That’s because prices change too. Inflation measures how much the cost of goods and services is rising, so it’s useful to compare the interest you’re earning with the current rate of inflation.

Here’s how it works and what to look out for.

What is inflation?

Inflation measures how much prices are rising over time.

For example, if inflation is 3%, something that cost £100 a year ago would cost around £103 today, on average.

In the UK, inflation is usually measured using the Consumer Prices Index (CPI). In August 2026, CPI inflation was 3.1%. The Bank of England‘s target is 2% over the medium term.

What does inflation mean for your savings?

This is where your savings interest rate comes in. Imagine you have £10,000 in a savings account earning 2% interest.

After a year, you’d have around £10,200, before tax.

But if prices increased by 3.1% during the same period, they rose faster than your savings.

Your balance has grown, but the amount you can buy with it hasn’t grown at the same rate.

This is sometimes called the real return: what your savings have earned after taking inflation into account.

How can you compare your savings rate with inflation?

It’s a simple comparison. Look at the interest rate you’re earning and compare it with the current inflation rate.

If your savings rate is below inflation, your spending power may fall over time.

If your savings rate is above inflation, your savings are earning more interest than the current rate of price increases.

This is only a simple comparison. Inflation reflects the average change in prices across a wide range of goods and services, while what you spend money on will likely be different (above or below).

Could a different type of savings account make a difference?

Different savings accounts offer different rates and levels of access, which can affect how quickly your savings grow.

Fixed-term savings accounts usually offer a fixed rate for a set period. If the rate is above inflation, your savings could grow faster than prices during that period. However, inflation can rise or fall during the term of your account, so this may change how far your savings go. The trade-off is that your money is usually locked away, and withdrawals may not be allowed or may come with a penalty.

Easy access savings accounts generally give you more flexibility to withdraw your money. Their rates are usually variable, so they can change over time. If the rate is above inflation, your savings are earning more interest than the current rate of price increases.

When comparing accounts, look at the interest rate, AER, access, withdrawal and general conditions, term and any balance limits.

What if your savings rate is below inflation?

If you’ve compared your savings rate with inflation and found it’s lower, it’s worth understanding why.

Check:

• The rate you’re currently earning
• Whether the rate has changed since you opened the account
• Any conditions attached to the rate
• How easily you can access your money
• Whether other savings accounts you already hold offer a different rate
• Whether your savings are covered by the FSCS

Savings rates can change over time. The Bank of England’s Base Rate can also influence rates across the wider savings market, although the relationship isn’t always one-to-one.

So, is your savings account keeping up?

There’s no need to make it complicated. Start by checking the rate your savings are earning and comparing it with the latest inflation rate.

If your savings rate is below inflation, your money may be losing some spending power over time. If it’s above inflation, your savings are currently growing faster than prices.

Rates and inflation can both change, so it’s worth checking in from time to time. And when you’re comparing savings accounts, don’t just look at the rate. Check how the account works, when you can access your money and any conditions that come with it.

A few minutes of checking can give you a much clearer picture of what your savings are doing.

TL;DR (too long; didn’t read)

• Inflation means prices are rising, which can affect what your savings can buy over time.
• Compare your savings rate with inflation to see whether your savings are currently growing faster or slower than prices.
• Fixed-term accounts can offer a fixed rate for a set period, while easy access accounts offer more flexibility with a variable rate.
• Check the small print, including withdrawal rules, terms, balance limits and AER.
• Keep checking: savings rates and inflation change, so what keeps pace today may not do the same forever.