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How does inflation affect savings?

When inflation is higher than the interest rate on your savings, the real value of your money decreases over time. For example, if inflation is 2.9% and your savings account offers 1% interest, your money is effectively losing 1.9% of its purchasing power each year. It's like your money is buying less and less.

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UK inflation hit 2.9% in July driven by 13% higher energy bills

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