“I did save – so why does it buy less?” The answer lies in three terms: inflation, interest and the real interest rate. Here is the arithmetic – without any recommendation on what to do with your money.
What inflation is
Inflation means prices rise and the same banknote buys less. Germany’s Federal Statistical Office (Destatis) measures it with the consumer price index (Verbraucherpreisindex, VPI), based on a notional basket of goods – rent, food, energy, fuel, services. For September 2026 Destatis reports 3.3 % year on year, the highest since December 2023, driven mainly by energy (+14.9 %). Core inflation was 2.4 %. For October 2026 Destatis provisionally estimates 2.8 % (core 2.1 %; final figure on 11 November 2026).
Why the ECB wants 2 %
The European Central Bank targets 2 % inflation over the medium term, symmetric since 2021: too little is as unwelcome as too much. For savers the deposit facility rate matters most – 2.50 % since 16 September 2026 (left unchanged on 29 October 2026; next decision 17 December 2026). See How our monetary system works.
Real interest rate
Real rate ≈ nominal rate − inflation
2 % interest with 3.3 % inflation gives roughly −1.3 %: the balance grows, purchasing power shrinks. A savings rate is only a real gain when it is above inflation.
Compound interest and the rule of 72
| Start | Rate | after 10 years | after 20 years |
|---|---|---|---|
| €1,000 | 2 % | €1,219 | €1,486 |
| €1,000 | 3 % | €1,344 | €1,806 |
Rule of 72: 72 ÷ rate ≈ years to double (about 24 at 3 %). In reverse, at 2 % inflation purchasing power halves in about 36 years, at 3 % in about 24.
Loss of purchasing power (money left uninvested)
| Inflation p.a. | after 10 years | after 20 years |
|---|---|---|
| 2 % | −18 % | −33 % |
| 3 % | −26 % | −45 % |
Pure arithmetic, not a forecast.
Savings account, call money, fixed-term deposit
Sparbuch (passbook, notice period, very low rate), Tagesgeld (call money, daily access, variable rate), Festgeld (fixed rate, no access during the term). All are covered by the statutory deposit guarantee of €100,000 per person per bank (§ 8 EinSiG) – protection against bank failure, not against inflation. The German consumer advice centres illustrate it: €1,000 at 1 % for ten years grows to about €1,104, but at 2 % inflation buys only what €906 buy today.
An emergency reserve belongs in an accessible account even though it shrinks in real terms. Everything beyond that is a personal decision. Whether and what suits you is something to clarify with an adviser licensed for that purpose.
How to proceed
- Estimate your personal inflation: which costs dominate your budget?
- Work out your real rate: account interest minus current inflation.
- Set an emergency reserve of two to three months’ expenses.
- Mind the €100,000 guarantee limit per bank.
- Have everything beyond the reserve assessed by a licensed adviser.
General information, not legal, tax or investment advice. Sources: Federal Statistical Office (press release no. 364, 13 Oct 2026), European Central Bank (strategy 2021, key rates as of 16 Sep 2026), Deposit Guarantee Act (§ 8 EinSiG), consumer advice centres (as of 26 Jan 2026) – as of October 2026. Want the maths for your own numbers? Get in touch.
