Why your savings could be losing value even if the balance isn’t falling

What does it mean for savings to lose “real value”?

A savings account can show a higher number every month and still be worth less in practical terms. The balance measures pounds. Real value measures what those pounds can buy. If prices rise faster than the interest being paid, the second figure falls even while the first one climbs.

This distinction rarely shows up on a bank statement. There’s no line that says “purchasing power: down.” The erosion is invisible until the saver tries to buy something they could have afforded outright a year or two earlier.

Why can a balance grow and still buy less?

Interest and inflation pull in opposite directions. Interest adds pounds to the account. Inflation reduces what each pound is worth. When the interest rate is lower than the inflation rate, the account is losing the race even as the number goes up.

A simple way to see it: £10,000 earning 2.5% a year becomes £10,250 after twelve months. If prices over the same period rose by 2.9%, that £10,250 buys slightly less than the original £10,000 did a year earlier. The saver has more money and less purchasing power at the same time.

What does the gap look like right now?

UK inflation, measured by the Consumer Prices Index, stood at 2.9% in July 2026, according to the Office for National Statistics — up from 2.6% the month before and the highest reading in four months, driven largely by a jump in energy costs following an Ofgem price cap increase.

Savings rates haven’t tracked that rise evenly. Average easy access savings rates across the market were running at 2.42% to 2.49% earlier in the year, according to Moneyfacts data, some way below the current inflation rate. The best available easy access deals do better, with top rates around 4.5% to 5% AER as of early September 2026, but those require actively shopping around rather than leaving cash in a default account. The Bank of England base rate, which shapes what providers can afford to pay savers, sits at 3.75% as of September 2026.

Put together, this means a saver in a default or long-unreviewed account is plausibly losing real value right now, while a saver in one of the market’s better deals is closer to standing still or slightly ahead. The difference between those two outcomes is often just a matter of which account the money happens to sit in.

Does this mean cash savings are a bad idea?

No. Cash still does a job nothing else does well: it’s accessible without notice, it doesn’t fall in nominal value, and it covers costs that can’t wait for an investment to be sold. An emergency fund, short-term savings goals, and money needed within the next year or two generally belong in cash, whatever the inflation backdrop.

The point isn’t to abandon cash. It’s to recognise that cash sitting for years at a below-inflation rate is doing a different job than most savers think it’s doing — and to make that a deliberate choice rather than an accidental one.

What’s worth checking

A few questions are worth asking about any significant cash balance:

• What rate is it actually earning, and when was that last checked against the current best-buy tables?
• Is the amount held in cash bigger than what’s realistically needed for emergencies and near-term spending?
• Has any of it been sitting in the same account, at the same rate, for more than a year without review?

None of these questions require a decision to be made immediately. They’re a starting point for working out whether the current mix of cash and other assets still matches what it’s meant to be doing.

FAQ

Is my money actually worth less if my balance hasn’t gone down?

Yes, in real terms, if the interest being paid is lower than inflation over the same period. The number on the statement is a nominal figure, showing pounds in the account. Real value adjusts that figure for what those pounds can buy. A balance can rise in nominal terms while falling in real terms whenever inflation outpaces the interest rate.

What’s the difference between “inflation” and my savings account losing value?

Inflation is the rate at which prices rise across the economy, published monthly by the ONS. A savings account “losing value” in real terms is the direct consequence of that inflation rate being higher than the interest rate on the account. They’re linked but distinct: inflation is the cause, and a below-inflation savings rate is the mechanism by which a saver actually feels it.

Should I move all my cash into investments instead?

Not necessarily, and this isn’t a decision to make from a general article. Cash and investments do different jobs. Cash offers stability and instant access; investments offer the potential for growth that can outpace inflation over the longer term, but with the risk that values can fall as well as rise, and money invested isn’t instantly accessible. The right balance between the two depends on individual circumstances, time horizon and attitude to risk, which is a conversation for a qualified adviser rather than a blanket rule.

How much should I keep in cash as an emergency fund?

There’s no single figure that fits everyone, but a common starting point is enough to cover three to six months of essential outgoings, held somewhere accessible without notice or penalty. Anyone with irregular income, dependants, or less job security may reasonably want more; anyone with very stable income and other accessible resources may need less.

Where can I check whether my savings account is keeping pace with inflation?

The ONS publishes the current CPI inflation rate monthly, and comparison sites such as Moneyfacts publish updated best-buy savings tables, including the average rate across the whole market. Comparing an account’s actual rate against both figures gives a quick sense of whether a balance is likely gaining or losing real value.

About the author

This article is provided by Sedulo Wealth, the financial planning arm of Sedulo Group. Sedulo Wealth works alongside Sedulo’s accountancy, tax and business advisory teams to give clients a joined-up view of their finances, and its advisers are authorised and regulated by the Financial Conduct Authority.