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Why cash savings lose to inflation in the UK in 2026

A guide to protecting your savings from inflation

Summary

As the cost of living crisis in the UK worsens, a question more and more people are starting to ask is how to protect savings from inflation. In recent years, the cost of essentials has risen sharply, from groceries, to energy bills, transport and even rent , the purchasing power of the pound is clearly being eroded. 

Meanwhile, the interest rates offered by bank savings and ISA accounts is barely enough to keep pace with inflation. To make matters worse, inflation could remain elevated for the foreseeable future. Why? Because national debt is at record levels while government spending shows no signs of slowing down.

This guide covers:

  • Why your money is losing purchasing power
  • UK inflation risk in 2026 and beyond
  • Cash savings vs gold ownership
  • Real interest rates vs nominal interest rates
  • The best inflation hedging strategies
  • Summary: how to protect savings from inflation

What is inflation?

Inflation is the rate at which prices increase over time. Any level of inflation above 0% effectively means that goods and services are rising in price over time. Or flipped around, it means that the pounds you own are losing purchasing power over time. 

The Bank of England’s inflation target is officially 2% and for many years now, UK inflation has remained above this target. What’s important to understand is that even if this target is achieved, it will still mean prices are increasing across the economy year after year. 

Pretty much everything costs more today than it did even just ten years ago, and this trend is set to continue. Those holding large cash savings could watch their purchasing power shrink over time, while those who own assets, like gold, are better positioned to ride out the inflation storm and preserve their wealth.

What causes inflation?

Inflation can be driven by several factors, some unavoidable and some driven by government policy. However, before we dive into what these drivers are, there’s a crucial bit of context to understand here: Inflation benefits the government. 

Why? Because it reduces the real value of national debt. 

Let’s unpack this. Inflation allows the government to spend beyond its means knowing that over time, the debt will effectively be eroded by inflation. A £3 trillion debt might seem like a lot today but over time, that amount won’t be worth as much. The downside is that neither will the pounds in your bank account. 

In this way, the government is essentially passing on the cost to you.

Causes of inflation:

  1. Government spending: When the government spends beyond its means, it leads to upward pressure on prices.
  2. Government borrowing: Persistent borrowing to fund spending programmes increases national debt.
  3. Monetary policy (money supply expansion): Increasing the money supply dilutes the value of the pound sterling
  4. Rising energy costs: If energy costs go up, it forces businesses to increase prices.
  5. Global supply and demand imbalances: Geopolitical issues can cause disruptions to supply chains that lead to higher prices globally.

Why your money is losing purchasing power

If you’ve been building your savings in pounds over time, the uncomfortable truth is that your money is losing purchasing power. Prices across the economy have risen faster than wages, and to make matters worse, even the best savings and ISA accounts only offer interest rates of around 5% per annum. That’s barely enough to keep up with inflation.

So how did we get to this point? Let’s take a quick trip down memory lane:

  1. The 2008 financial crisis: where it all started
    After the global financial crash in 2008, central banks around the world, including the Bank of England, cut interest rates to near zero. This helped stabilise the economy in the short term but it also increased the supply of money in the system.
  2. A decade of low rates and cheap money
    For years, borrowing remained cheap. This meant the government, business and even households took on more debt.
  3. Covid-19 and massive stimulus (2020–2021)
    In response to the Covid pandemic, the government began stimulus spending on initiatives like furlough schemes and business support programmes. This increased the supply of money in the economy even further.
  4. Energy shocks and global conflict (2022 onwards)
    Ongoing conflicts and geopolitical issues have disrupted supply chains, driving up energy costs. When the cost of energy goes up, it has a ripple effect that drives up the cost of everything else from transport to manufacturing to consumer goods.

Understanding this context is crucial because it reveals that the current inflationary environment is not short term in nature. It is both global and long lasting.

UK inflation risk in 2026 and beyond

There’s an inconvenient truth we need to face. Inflation could remain elevated for years to come. 

Here’s why:

  1. National debt is very high
    The government is likely to implement policies that lead to higher inflation as a way to dilute the real value of national debt over time.
  2. Reckless government spending
    The UK government continues to spend beyond its means. This may help to plug short term gaps but it risks keeping prices elevated
  3. External shocks and geopolitical turbulence
    Disruptions to global supply chains have made it more expensive to produce and transport essential goods. When supply is restricted but demand remains, prices rise.

In 2026 and beyond, inflation risk is high. The overwhelming likelihood is that prices will continue to rise across the economy meaning the purchasing power of cash will continue to diminish. 

Cash savings vs gold ownership

Before the digital age, cash had a number of unique benefits that made it preferable even during times of inflation. You can pay for things with cash, store it at a bank instead of in a safe, and when payday comes, it just goes straight into your account.

However, gold has been given a digital makeover. Instead of queuing to buy physical gold, there are various apps that allow you to buy gold. 

TallyMoney is leading the way here by offering a full savings account that converts your pounds into gold instantly. And just like a regular bank, you can spend from your balance in any currency. You even get a Tally Debit Mastercard® that you can use anywhere in the world. This changes the game as the benefits that cash once had over gold are now effectively features of both. TallyMoney gives you the best of both worlds – the inflation protection of gold, with the spendability of cash.

It’s important to remember that gold has been used as a store of value for thousands of years, and it continues to play that role today.

Here’s why:

  1. It has a limited supply
    Gold cannot be printed out of thin air in the same way as fiat currency.
  2. Globally recognised
    Gold is valued and accepted around the world.
  3. Neutral and independent
    Gold is a neutral asset that is not subject to the policies of any single government.

But gold doesn’t pay interest?

It’s true, you don’t earn interest by holding gold. However, gold’s capital growth tends to outperform bank interest rates significantly.(SOURCE: ) In fact, since the year 2000, the price of gold has averaged over 11% growth each year. That’s more than double the annual interest you would earn from holding your savings in even the best ISA account.

And we haven’t even factored in inflation yet. Your bank may advertise an interest rate of 5% but what they don’t tell you is that to calculate your real interest rate, you need to minus the inflation rate. 

So if inflation is at, say 3%, then the real interest rate you would earn would actually be 2% (5% – 3% = 2%).

Whilst it’s true that the price of gold can fluctuate in the short term, it’s proven to grow over the long term. This is why owning gold is more important than ever.

The best inflation hedging strategies

During periods of high inflation, the cash you own is likely to diminish in terms of purchasing power. For this reason, many people move their savings into assets. Assets have the potential to grow in value. The most common assets include property, stocks, crypto, and of course gold.

Each asset class has its pros and cons, however in the context of inflation hedging strategies, gold stands out. Not only has gold been used as the ultimate hedge against inflation for thousands of years, but it is also the most accessible, the safest, and offers amongst the highest capital growth.

Let’s review each asset class:

1. Property

Buying a property can be a great way to hedge against inflation. As an asset class, it offers the potential for high capital growth and even the possibility of rental yield. 

However, property is relatively expensive compared with other asset classes. Moreover, buying and selling properties can be a slow arduous process.

2. Stocks and shares

Stocks and shares can offer high capital growth and monthly income in the form of dividends. 

However, the stock market can experience sharp corrections and during times of high inflation, central banks are less likely to cut interest rates, limiting the potential for capital growth.

3. Bitcoin and cryptocurrencies

Bitcoin and the crypto market have delivered rapid growth in a relatively short space of time. But with that comes volatility. As an asset class, crypto is still in its infancy and crashes of 80% are common.

Blockchain and distributed ledger technology have a bright future, but for the time being,  trading crypto is more about making quick gains than being a hedge against inflation.

4. Gold

Gold stands apart from other asset classes, particularly in times of inflation:

  • Long-established store of value:
    It has preserved purchasing power across centuries and multiple economic cycles
  • Independent of financial systems:
    Its value is not directly tied to corporate performance or government policy
  • Relative stability:
    While it does fluctuate, it is generally less volatile than more speculative assets like cryptocurrencies
  • Accessible:
    In the digital age, you can buy gold through your smartphone in a matter of minutes
  • Spendability:
    TallyMoney lets you build your savings in gold, and spend from your balance in any currency.

 

Summary: how to protect savings from inflation

Complacency is the real wealth killer. Inflation builds up gradually without you noticing. Things get more expensive in the background. The longer you leave it, the less you’re able to buy with your money over time.

Those with large cash savings are likely to see their purchasing power decline over time unless they move their money into an inflation hedge. Gold stands out as the asset which is tailor-made for savers. It has been used as a store of value for thousands of years, delivering consistent, stable growth. It is globally recognised, has a limited supply and is not subject to the policies of any single government.

TallyMoney has made it quick and easy to convert your pounds into gold and even convert them back into pounds (or any currency for that matter) when you want to buy things. You get all of the benefits of a regular bank account, just without the inflation part.

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Real World Examples

  1. Fancy a coffee? Use your TallyMoney Mastercard. Boom – paid. (Yes, you’re buying a flat white with gold. How amazing is that?)
  2. Need cash? Use any Mastercard ATM worldwide or spend across the globe. ZERO fees from us, ZERO markup. (When you spend or withdraw, your gold converts instantly at the global spot price. No catches, no hidden charges – just straight-up Mastercard exchange rates. Because your money shouldn’t cost you… more money.)
  3. Want some money back in your bank? Just tap ‘transfer’ in the app. (Though after a while, you might wonder why you’d want to…)

    Zero faff. Zero waiting. Zero fees when you spend tally.

Meet Cameron Parry

Meet the guy who wouldn’t accept being trapped in a ‘heads they win, tales we lose’ government-run monetary system that protects and benefits the financial institutions, to the detriment of the public. Where people’s deposits are constantly at risk, and losing value through inflation caused by central bankers and politicians.

If necessity is the mother of invention, then frustration may be the roommate’s cousin of motivation. In any case, he decided to stop getting mad and start a new monetary system with sound money. Where deposits serve the depositor, where savings build wealth for savers, and transactions are made in a familiar way. And he called it TallyMoney.

TallyMoney: Gold upgraded

With TallyMoney:

  • Your pounds instantly become physical gold (1 tally = 1mg of real gold)
    Stored in Swiss vaults (not under your bed)
  • Fully insured and allocated (actually yours, not a paper promise)
  • Spend it anywhere with your TallyMoney debit Mastercard
  • Transfer back to pounds instantly if needed (but why would you?)

We’re not anti-bank because it’s trendy. We’re anti-bank because the current system is rigged against you. Every day you leave money in a “savings” account, you’re funding their profits while your wealth evaporates.

Enter gold: the original currency

Why gold? It’s value is universally acknowledged.

  • It’s not controlled by any single government
  • It can’t be printed or manufactured
  • It’s actually scarce 
  • It requires effort to extract it 
  • It doesn’t rust, decay, or disappear
  • It has remarkable properties

So while the pound’s lost 50% of its value since 2004, gold’s grown by 146% in the last decade alone. While your bank savings got mugged by inflation, gold owners were laughing all the way to… well, not the bank.

But here’s the rub: Traditional gold ownership is a right pain. Buy physical bars? Prepare for storage fees that’ll make your eyes water, insurance premiums that never end, and a 5-10% haircut when you need to sell. Plus, try buying your weekly shop with a gold ingot.
Paper gold ETFs? They’re classed as Tier 3 assets for a reason – that’s financial speak for “risky as hell.” You don’t own gold, you own a promise. A tradeable IOU. And when everyone wants their gold at once? Good luck with that. So you’re stuffed either way: real gold that’s impossible to use, or fake gold that might not be there when you need it.
Until now.

The truth about inflation

How? Well, when politicians overspend (and they invariably do), they need more money to ‘stimulate the economy’. But raising taxes makes voters angry. So what do they do? They fire up the money printer, and boy do they love to print. To give you a sense of the scale, since 2015 the Bank of England has created £520bn out of thin air through “quantitative easing” (electronic money printing) plus £86bn in physical currency. 

Thing is, more pounds in circulation = each pound is worth less. Think about it: In 2004, £100 could buy you a decent night out, theatre tickets, and a cab home. Today? That same £100 barely covers the theatre tickets. Your money didn’t disappear – it was diluted, like someone’s been topping up your whisky with water when you weren’t looking.

The “2% inflation target” they bang on about? That’s them telling you they plan to steal 2% of your wealth every single year. And calling it healthy.

How TallyMoney actually works?

  1. First things first: we’ve got actual gold bullion* (none of that paper-promise nonsense) locked up tight in a Brinks vault in Switzerland. Yeah, those Brinks – the security legends who’ve been protecting valuables since Queen Victoria was on the throne.
  2. You send your pounds to your TallyMoney account (bye-bye, inflation-addicted fiat!).
  3. We use the global gold spot price to instantly turn your currency into its weight in gold. No hidden or fuzzy exchange rates, just the real market gold price + 1.49% gold purchase fee.
  4. Each milligram of your physical gold = 1 tally (we keep it decimal because no one wants to faff about with troy ounces – the specific unit for measuring gold).
  5. That’s it! Your app shows your balance in tally, but remember – those aren’t just numbers on a screen. That’s your solid gold, in milligrams, sitting pretty in Switzerland.
  6. You can now save and spend your gold as you see fit.

*All Tally gold is sourced from LBMA-accredited providers because we’re rebels with a cause… and standards. Instead of tracking the gold price per kg, your money is directly converted based on the real-time global gold spot price.

TallyMoney is real money

  1. Store of value
    Your gold sits in a Swiss vault (not getting ‘quantitatively eased’ away)
    Evidenced by 5,000 years of holding its value
    Can’t be inflated by government whim and fingers on the ‘currency print’ button
  2. Medium of exchange
    Spendable at 150+ million shops worldwide (thanks, Mastercard)
    Currency converts instantly at market rates (no sneaky margins)
    Moves as quickly as sending a text 
  3. Unit of account
    1 tally = 1mg of gold. Simple
    Stable enough to actually plan your future with
    Speaks every currency’s language (gold’s kind of a big deal everywhere)

This is why TallyMoney is so much more than just owning Gold – it’s a real financial revolution. We’re not just helping you own gold; we’re bringing back what money was always meant to be. Sound Money for a Brighter Future. Because your hard work and wealth deserve better than being slowly robbed by external forces.

We want you to have real money

  1. A store of value:
    Keeps its value over time
    Insulated from devaluation/inflation
    Actually rare and can’t be created out of thin air
  2. Medium of exchange:
    Easy to use for everyday transactions
    Widely accepted
    Can be transferred efficiently
  3. Unit of account:
    Works like a proper value-measuring stick (imagine if your ruler shrunk every year – mad, right?)
    Splits nicely into useful bits
    Reliable enough to plan your future with

Why does this matter? Because your hard work deserves better than being turned into monopoly money by someone else’s actions. Every time your currency loses value (inflation) its stealing from your past work, which harms your present savings, and your future dreams.