More than half of Britons don't know what runaway inflation means for their savings - and some even think it will leave them better offMore than half of savers don't know what impact inflation will have on the real value of their cash savings over time, according to research by Legal & General.
Despite inflation continuing to climb to levels not seen since the early 90s - 7 per cent as of March - the research suggests a large number of Britons may be in for a nasty shock.
It found that 13 per cent believe inflation will leave them better off, while a similar proportion believe the real value of their savings would stay the same.
It also found that more than a quarter of Britons simply don't know what impact inflation could have on their cash.
Emma Byron, managing director at Legal & General Retirement Solutions said: 'Inflation is at its highest rate for three decades and it's worrying that savers don't realise it's eating away at millions of pounds sitting in low-interest paying accounts.
'Understanding the impact of inflation is crucial to understand how much money you have in real terms.
'Whilst it is essential to keep some cash in the bank for an emergency fund, savers might want to consider other options to make their money work harder.'
For someone stashing away £10,000 in an account paying next to nothing, they will see the purchasing power of their cash disintegrate if inflation continues at current levels.
For example, if prices rise by 7 per cent annually for the next five years, then the value of £10,000 will have the equivalent purchasing power of £7,220 in five years. In 11 years the real value of that £10,000 would have halved.
Even looking back, savers will see the brutal impact of inflation on their savings over the past year alone.
£10,000 stashed away in an account paying next to nothing in March last year would be worth the equivalent of £9,300 in purchasing power if you tried to spend it in March this year.