Inflation
Inflation means that prices rise over time and your money therefore loses purchasing power. For the same amount you get less than before.
Example: a scoop of ice cream cost approx. €0.80 in 2010 and approx. €2.00 in 2026. That is inflation in action.
Why does it happen? Main causes: rising demand with scarce supply, higher production costs (energy, raw materials), or too much money in circulation.
The ECB's target: 2% inflation per year is considered ideal – enough for economic growth, not enough to harm savers. In 2022 inflation in Germany temporarily rose to over 8% (annual average: 6.9%).
What inflation does to your savings: this is how much purchasing power €10,000 today will still have later:
After… | at 2% inflation | at 3% inflation – 10 years: approx. €8,200 | approx. €7,440 – 20 years: approx. €6,730 | approx. €5,540 – 30 years: approx. €5,520 | approx. €4,120. That is why long-term savings should earn at least the inflation rate as a return.
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