What is the impact of inflation on savings?

Inflation erodes the purchasing power of money, which can significantly impact savings over time. As the general price level of goods and services rises, the real value of savings declines unless the savings generate returns that outpace inflation. For example, if the inflation rate is 3% per year, but savings earn only a 1% interest rate, the purchasing power of the savings decreases by 2% annually. This makes it important for savers to invest their money in assets that generate returns higher than the inflation rate, such as stocks, bonds, or real estate, to preserve and grow their wealth.