Inflation and Savings

A balance can grow while its buying power shrinks. Here is the arithmetic, with real numbers.

Last updated: October 12, 2026. The FDIC national rates (figures as of September 21, 2026) were read on that date. The 2%, 3% and 4% inflation rates are assumptions chosen to illustrate the effect; this page does not state or forecast the current inflation rate. All results were computed with this site's savings code.

Nominal versus real

A nominal balance is the dollar amount you see on a statement. A real balance adjusts that amount for rising prices and tells you what the money can buy in today's dollars. If prices rise 3% a year, then something that costs $1,000 today costs $1,344 in 10 years and $1,806 in 20 years. Real value is nominal value divided by the cumulative price increase.

Cash with no interest

Take $10,000 held as cash at 0% interest with an assumed 3% inflation rate. After 10 years the balance is still $10,000, but it buys what $7,441 buys today. You have lost $2,559 of buying power without spending a dollar. This is also why the rule of 72 applies in reverse: at 3% inflation, prices double in about 24 years (72 ÷ 3), or 23.4 years exactly.

Cash in the bank at national average rates

The FDIC's national deposit rates for September 21, 2026 were 0.37% for savings, 0.63% for money market accounts and 1.73% for 12-month CDs. With the same assumed 3% inflation, here is $10,000 after 10 years:

Every row grew in dollars and every row lost buying power. The higher rates reduced the loss but did not eliminate it. Only a rate above inflation grows real wealth, and the table shows how large the gap can be when the rate stays well below the inflation assumption. The 12-month CD recovered the most in the example, yet still left the owner about $1,167 behind in real terms.

The assumption matters a lot

Because the inflation rate is unknowable in advance, test several. A $10,000 balance earning 0.63% for 20 years grows to $11,338 nominal. In real terms that is:

• $7,630 if inflation averages 2%;
• $6,278 if it averages 3%;
• $5,175 if it averages 4%.

The same dollar balance can mean a 24% or a 48% loss of buying power depending on the path of prices. Use the savings calculator's inflation field to see the real balance for your own rate and horizon.

What this does and does not mean

It does not mean you should hold no cash. Emergency money earns its keep by being available, as the emergency fund guide explains. It means money you will not need for years deserves a deliberate decision about its rate. The options range from ladders of CDs, covered in CD ladder, to Treasury bills, covered in savings vs CDs vs Treasury bills, to long-term investing, where risk of loss exists. The dollar-cost averaging page explains one way to enter investments gradually. This site does not tell you which to choose.

A simple check you can do today

Subtract your assumed inflation rate from your account's rate. A negative answer means you are paying, in buying power, for the convenience of safety. That cost can be worth it for emergency money and not worth it for money you will not touch for a decade.

Try your own rate and inflation in the savings calculator. These guides are for education and are not financial, tax, legal or insurance advice. Nothing you type into the calculators is sent anywhere.