Inflation and Loss of Purchasing Power: Why Saving No Longer Pays

Short answer: Inflation means prices rise and every euro buys less. This loss of purchasing power eats into savings when the interest rate is below the inflation rate. That is exactly the rule today: instant-access savings pay 0.52% on average in Germany, while prices rise by 2.8%. In real terms you lose a good 2% of your savings every year.

You put something aside every month, and the number in your account grows. But at the supermarket, the petrol station and with the rent, you notice that you get less for it than before. Both are true at the same time: in nominal terms your savings grow, in real terms they shrink. This article shows in figures how much purchasing power the euro and the franc have lost since 2000, why classic saving no longer makes up for it, and where bitcoin helps and where it doesn't.

What is inflation?

Inflation is the general rise in prices. It is measured with a basket of goods: every month, the Federal Statistical Office (Destatis) records the prices of around 700 kinds of goods, from bread to electricity to rent, weighted by what households spend on them. If the price of this basket rises by 3% in a year, the inflation rate is 3%.

The flip side is the loss of purchasing power. If the basket costs 3% more, the same amount of money buys around 3% less. So your money doesn't lose in number, but in value.

Germany has two measures: the consumer price index (VPI) from Destatis and the Harmonised Index of Consumer Prices (HICP, German HVPI), with which Eurostat makes all EU countries comparable. Austria measures in the same way; Switzerland uses the national consumer price index (LIK). The figures differ slightly, the direction is the same.

Rule of thumb: Inflation is not a price that rises. It is your money that becomes worth less.

Loss of purchasing power in figures: Germany, Austria, Switzerland

What is your money worth since the euro was introduced? The table compares the average prices of the year 2000 with those of 2025, the last complete year.

Source: Eurostat HICP (Germany, Austria, euro area), Federal Statistical Office/SNB LIK (Switzerland); annual averages.

Anyone who put a €100 note under the mattress in 2000 has lost 40% of its purchasing power today. The franc held its value much better, but it too lost around an eighth in 25 years.

The inflation wave of 2021 to 2023

For a long time, inflation in the euro area was below 2%, and many thought it was dealt with. Then came supply bottlenecks after the pandemic and, in 2022, the energy price shock. The HICP for Germany rose by 8.7% in 2022, in Austria by 8.6%; the euro area reached 8.4%.

These years still have an effect today: from 2020 to 2025, prices in Germany rose by 25% and in Austria by 28%. What cost you €100 in 2020 costs €125 or €128 today. Prices don't fall back afterwards; only their rise slows down. In Switzerland, the surge was much smaller, at 7% in five years.

The wave isn't quite over. In October 2026, the inflation rate in Germany was 2.8% (September: 3.3%), in Austria 3.6% according to the flash estimate. Switzerland reported 1.0% for September 2026.

Why saving no longer pays in real terms

Whether saving pays is decided not by the interest rate alone but by the real interest rate: the interest rate minus inflation. If it is negative, your savings are worth less every year, even if the number in your account grows.

Interest rates: bank average for new deposits of private households, September 2026 (ECB interest rate statistics). Inflation: October 2026 (Destatis VPI, Statistics Austria flash estimate).

In Switzerland, the SNB's policy rate has been 0% since 2025, and inflation is 1.0%. Savings accounts there pay correspondingly little; the real rate is usually negative here too, just less so than in the euro area. How the Fed, ECB and SNB set their rates and what that means for the bitcoin price is shown in Interest rates, central banks and bitcoin.

Then there are taxes. In Germany, interest above the saver's allowance (Sparer-Pauschbetrag) of €1’000 (couples €2’000) is subject to 25% Abgeltungsteuer (flat withholding tax) plus solidarity surcharge; in Austria to 25% capital gains tax; in Switzerland, interest counts as taxable income. The nominal interest is taxed, not the real interest.

That doesn't mean a savings account is pointless. For your emergency fund and for spending in the coming months, you need money that doesn't fluctuate and is available at any time. It just doesn't work for building wealth over decades.

Where does inflation come from?

In the short term, energy, supply chains or wages drive prices. In the long term, a simple observation holds: if the money supply grows faster than the quantity of goods and services, prices rise.

The euro area's M3 money supply, i.e. cash, current and savings deposits and short-term investments, stood at €4.45 trillion when the euro was introduced in January 1999. In September 2026 it was €17.72 trillion, around four times as much. Consumer prices rose by a good 70% over the same period. A large part of the new money didn't flow into the supermarket, but into shares, bonds and property. Their prices rose much more. Why those who receive new money first benefit most is shown in the article The Cantillon effect. Whether and how strongly the growing money supply also moves the bitcoin price is examined in M2 money supply and the bitcoin price with data since 2013.

None of this is an accident; it is intended. The ECB aims for inflation of 2% over the medium term; the SNB defines price stability as inflation below 2%. Mild inflation is meant to keep debts sustainable and prevent people from postponing purchases. For you as a saver it means: your money is built to lose value. Who creates the new money and why its quantity almost always grows is shown in The fiat money system, explained simply. How states shrink their debts this way and why that speaks for bitcoin is shown in the article Government debt and bitcoin.

Why 2% is more than it sounds

The effect of inflation is compound interest in the wrong direction. The rule of thumb "70 divided by the inflation rate" shows after how many years the purchasing power of your money has halved:

For your retirement provision, this is crucial. If you save at 35 and retire at 67, at 2% inflation you lose almost half the purchasing power of today's savings before you need them. How to factor inflation into a pension from bitcoin is shown in How many sats do I need for retirement?

What helps against loss of purchasing power and what doesn't

An investment only protects against inflation if, over your investment period, it returns more in real terms than prices rise. The options differ mainly in volatility, costs and whether someone can increase the supply. A digital euro wouldn't change that either: like cash, it is to pay no interest, and the ECB continues to decide the supply. More on this in the comparison Digital euro and bitcoin.

Which mix suits you depends on your time horizon, your nerves and your goals. How fixed-term deposits, bonds and dividend stocks compare with the higher dividends of bitcoin preferred stocks is shown in Digital credit compared. How to set a concrete goal and work it through is shown in the article Setting and planning your bitcoin goal.

Bitcoin and inflation: a fixed supply instead of money creation

Bitcoin is an answer to exactly the problem of this article. There will never be more than 21 million bitcoin, and when and how many new ones are created has been in the code since 2009. No central bank, no state and no company can increase the supply. Why this very scarcity makes good money, and how euro, franc, gold and bitcoin score on all the properties of money, is shown in the comparison What is good money? Why central banks themselves are looking for reserves that no state can debase, and what role bitcoin could play, is shown in Bitcoin as a reserve currency.

Currently, 3.125 new bitcoin are added per block, around 164’000 a year. That is supply inflation of about 0.8% a year, and it halves roughly every four years, next probably in 2028. For comparison: the euro M3 money supply has grown by a good 5% a year on average since 1999.

Why the supply is limited and how new bitcoin are created is explained in the introduction What is bitcoin?. The Academy offers the basics calmly and step by step under Basics.

No protection for the next few months

A fixed supply doesn't make bitcoin a short-term inflation hedge. The inflation year 2022 shows this clearly: while prices in Germany rose by 8.7%, bitcoin fell in euros from around €40’800 to €15’500, a loss of 62%. Since its record high of October 6, 2025, bitcoin has also lost around 40% (as of Nov 12, 2026).

Over longer periods it looks different. Anyone in history so far who held for four years was always in profit in dollars, in the worst case by 31% (purchase in April 2021). Over five years, however, there were also losses: anyone who bought at the high in December 2017 was 14% down five years later. Bitcoin protects purchasing power, if at all, over many years and only for money you don't need during that time.

What the Power Law model says about purchasing power

The Power Law model describes the long-term trend of the bitcoin price and a lower bound, the floor, at 42% of the Power Law line. On Nov 12, 2026, the floor was around €60’570 (about CHF 55’900), the bitcoin price €64’641 (about CHF 59’700), so 7% above it.

Four years earlier, in November 2022, the floor was around €15’360. It has almost quadrupled since then, while consumer prices rose by around 10%. At the end of 2022 the price even dipped briefly below the floor. The model is a description of the past, not a guarantee; how it is built and where its limits are is in the methodology and in the article The bitcoin Power Law explained.

How to protect your purchasing power step by step

1. Emergency fund in euros or francs. Three to six months of expenses belong in an instant-access or savings account, even if it loses in real terms. You never have to sell this money in a low.
2. Check the real rate. For each account and each bond, compare the after-tax interest with the current inflation rate. If it is below, you are losing purchasing power.
3. Invest long-term money separately. What you won't need for ten years or more belongs in assets whose supply can't grow at will: broadly diversified shares, real assets or a bitcoin share with which you can withstand price crashes of 70%.
4. Buy regularly instead of guessing the timing. A savings plan spreads your purchases over good and bad months. Which providers are cheap and allow withdrawal to your own wallet is shown in the bitcoin savings plan comparison.
5. Hold it yourself. Bitcoin only protects you from other people's decisions if you hold your keys yourself. How to do that is in the guide Storing bitcoin safely.

How a monthly bitcoin savings plan would have turned out so far, you can work out here for your amount and period:

If you have already saved a larger amount, the calculator Lump sum or savings plan compares which route was historically better.

More articles on money, interest rates and central banks are collected in the category Macro & money.