Impact of Inflation on Irish Household Savings
A 1 percentage point increase in inflation, rising from 2% to 3%, on a base of €161 billion in savings leads to an additional €1.61 billion in purchasing power lost each year.
Calculation of Real Value Loss
This calculation is based on the difference in “real value” between the two inflation rates. At 2% inflation, the loss of value amounts to €3.22 billion annually, while at 3% inflation, it increases to €4.83 billion. This results in an incremental annual loss of €1.61 billion.
Breakdown of Losses
- At 2% Inflation: The €161 billion loses €3.22 billion in value per year.
- At 3% Inflation: The €161 billion loses €4.83 billion in value per year.
- The Difference: An extra €1.61 billion is lost annually due to the 1% increase in inflation.
For individual savers, the rise in inflation will have an immediate impact on the value of their money. To demonstrate the impact, MoneyWhizz has developed a calculator that allows users to test various rates of inflation over time.
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