What effect do inflation rates have on savings?

Inflation rates have a significant impact on the purchasing power of saved money. When inflation occurs, the prices of goods and services generally increase, which means that the same amount of money will buy fewer items than it did before. As a result, even if an individual has money saved, the value of that money diminishes over time if it does not earn an interest rate that exceeds the rate of inflation. Thus, inflation effectively reduces the purchasing power of savings, meaning savers can afford less with the same amount of money in the future. This is critical for individuals to understand as they plan their finances and savings strategies, ensuring that their savings do not lose value over time due to inflation.