Two-fifths of Brits unclear on how inflation impacts savings

Understanding and awareness of how inflation impacts people’s savings is low across the UK population, with two fifths (39%) not knowing about this at all, according to research from Tesco Bank.

The rate of inflation is important for consumers because it shows how much the prices of goods are rising and how it can reduce consumers’ purchasing power. Among those who don’t fully understand what inflation does, 11% incorrectly believe inflation increases the value of savings, while 7% think inflation does nothing. One in five (20%) reveal they simply aren’t sure what inflation means.

Nearly half (49%) of those in their twenties and forties are unsure how inflation can impact their savings. While those in their twenties are the group most likely to incorrectly identify whether savings values go up or down with inflation (23%), those in their forties are the highest (27%) for revealing they simply don’t know what the impact of inflation is.

Chris Henderson, Save and Pay Director, Tesco Bank said:

“Given the cost of living, it’s concerning that so many people are in the dark on inflation and the impact it has on their money.

Knowing what inflation does to your money, and how you can protect your savings when the inflation rate is higher, is an important part of managing personal finances. When the rate of inflation is on the rise, it means the costs of things in our everyday lives are going up more quickly, so the money we have in the bank doesn’t stretch as far. As an example, if inflation remains at 3.5% for the next 12 months, the £100 you have in the bank today would buy you £96.62 worth of goods in a year’s time*.

The truth is that inflation is different for everyone depending on what you buy, or pay for, each month but being aware of the UK’s inflation rate is important.

While there is no fail-safe way to protect your money from inflation, making sure you are getting a competitive interest rate on your savings can certainly help.”

*Compounding inflation applied after 1 year. Calculation = (1 + 0.035) = 1.035

£100 / 1.035 = £96.62

Inflation is a compound factor, so if inflation in any given year leads to higher prices, higher prices are the starting point for next year’s inflation.

Teamspirit

Olivia Nelson (onelson@teamspirit.co.uk, 07392106925)

Elisha Wijesekera (ewijesekera@teamspirit.co.uk)

TescoBank@teamspirit.co.uk

Research conducted by Opinium Research on behalf of Tesco Bank. Sample was 2,000 UK adults (aged 18+). Fieldwork was undertaken 6th and 9th May 2025. All data has been weighted to be representative of the UK population.

Tesco Bank began life in 1997 and now help around 3.8 million customers to manage their money a little better every day. This means creating products and services which make customers’ lives simpler, giving them more of what they value, and rewarding their loyalty through Clubcard. Today, through a long-term strategic partnership between Barclays and Tesco, Barclays provides customers with Tesco Bank branded banking products and services. Our colleagues serve our customers seven days a week from our three main centres in Edinburgh, Glasgow, and Newcastle, and we’re also available through online and mobile banking 24/7.