Lesson 1 of 5 · 5 min read
Inflation & saving
Money in a savings account feels safe, but inflation quietly nibbles away at it. That's why people invest.
What is inflation?
Inflation means prices rise on average. What cost €100 last year might now cost €103. Your money then buys less. So with 3% inflation you lose roughly 3% of purchasing power per year if your money stays still.
Why saving alone isn't enough
If your savings account pays 1.5% interest and inflation is 3%, you actually become poorer in purchasing power. Saving is perfect for your emergency buffer and short-term goals, but for the long term you need a return that beats inflation.
Investing as a counterweight
Stocks and ETFs have historically returned an average of 6–8% per year over the long term — more than enough to beat inflation. It comes with fluctuations, but time in the market smooths those out.
You put in $36,000. The other $42,139 is pure compound growth. Time does most of the work.
Stocky says
Don't calculate with a single year's return but with the average over 10+ years. Over that horizon the broad market has historically beaten inflation comfortably — that's what investing is strong at, saving isn't.
Remember this
- Inflation makes prices rise, so idle money loses purchasing power every year.
- If your savings rate is lower than inflation, you become poorer in purchasing power.
- Saving is ideal for your emergency buffer and the short term, not for the long term.
- Stocks and ETFs have historically returned 6–8% per year and thus beat inflation.
There is a quiz for this lesson
3 questions that check whether it stuck. They live in the app, because a quiz nobody grades teaches nothing.
Want to practise, not just read?
Stockedin teaches investing in short lessons, with €10,000 in demo money to make your mistakes with. Stocky, the AI coach, explains anything you get stuck on.