When it comes to storing money, many people assume a savings account is the safest option. Savings accounts do offer important advantages: they are FDIC-insured, liquid, and preserve your nominal balance. But they do little to protect your purchasing power over time, particularly when inflation runs above the interest rate your savings earns. This article explains how inflation erodes purchasing power, what that means for savers, and how some investors approach the problem.
Purchasing power is a measure of how much your money can actually buy. When prices rise due to inflation, each dollar buys less than it used to. If a week's worth of groceries cost $100 last year but costs $110 today, your dollar has lost roughly 9% of its purchasing power on that item. Over time, even modest annual inflation compounds into meaningful erosion of real value.
Inflation is the general increase in the price of goods and services over time. It is driven by a range of factors, including changes in consumer demand, supply chain conditions, energy prices, monetary policy, and broader economic cycles. According to the U.S. Bureau of Labor Statistics, the average annual inflation rate in the U.S. from 1990 through 2018 was approximately 2.46%. (BLS via InflationData) The Federal Reserve targets a 2% inflation rate over the longer run. (Federal Reserve)
The challenge for savers is that the national average savings account interest rate, as of January 2025, was just 0.41% APY according to the FDIC. (FDIC) When inflation runs above that rate, the real purchasing power of savings declines over time even as the nominal balance stays the same or grows slightly.
The table below illustrates this dynamic using hypothetical figures. This is an example only and does not reflect any specific account, investment, or guaranteed outcome.
The core point is straightforward: when your savings earn less than the rate of inflation, the real value of your money declines over time. This does not mean savings accounts are without value. They serve an important purpose for emergency funds and short-term liquidity. The question is whether they are sufficient as a sole long-term strategy.
Some investors look to real estate as one way to address inflation risk in a portfolio. There are a few reasons why real estate is often discussed in this context, though it is important to understand the limitations alongside the potential.
U.S. residential real estate has historically appreciated at an average rate of approximately 3% to 5% per year nationally over the long term, based on data from the Federal Housing Finance Agency and the S&P CoreLogic Case-Shiller Index. (Redfin) (FHFA) On a national average, this has historically kept pace with or modestly exceeded inflation over long periods, though this varies significantly by market, property type, and time period.
It is equally important to note that real estate values can and do decline significantly. National home prices fell approximately 27% from their 2006 peak to their 2012 trough according to the S&P CoreLogic Case-Shiller Index, with some markets declining more than 50%. Appreciation is not guaranteed, and past performance is not indicative of future results.
Real estate investments may generate rental income in addition to any appreciation. As the general cost of living rises, rental rates in many markets have historically risen alongside it, though this is not guaranteed and varies by location, property type, economic conditions, and local supply and demand.
For fractional real estate investments like those offered through Realbricks, projected quarterly dividend distributions are estimated from rental income. These distributions are not guaranteed, depend on property performance, and may not be paid on a predictable schedule or at all.
As the cost of construction materials such as lumber, steel, and concrete rises with inflation, building new homes becomes more expensive. This can, in some market conditions, support the value of existing properties by raising the cost of new supply -- though this dynamic is one of many factors that influence property values and does not guarantee appreciation.
Each of the points above reflects general historical patterns and general economic theory. They are not projections for any specific investment and should not be relied upon as such.
For investors interested in gaining exposure to residential real estate without the capital requirements of direct property ownership, Realbricks offers fractional ownership interests starting at $100.
✅ Start with just $100 -- No credit checks, no mortgages required.✅ Fractional ownership interests in vetted residential properties -- Participate in real estate without buying a whole home.✅ Projected quarterly dividend distributions -- Estimated from rental income; subject to property performance and not guaranteed.✅ Potential for property appreciation -- Property values can go up or down over time.✅ We handle property management -- You are a passive investor, not a landlord.✅ Offering qualified under Regulation A with the SEC -- Structured framework for investor transparency and disclosure.
Important limitations to understand before investing:
You can review the full risk factors in our Offering Circular.
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Inflation is a long-term reality that savers and investors need to understand. A savings account earning below the rate of inflation will lose real purchasing power over time -- that is a straightforward mathematical outcome, not a prediction.
What to do about it depends entirely on an individual's financial situation, time horizon, liquidity needs, and risk tolerance. Some people hold savings accounts for emergency funds and short-term needs while looking to other asset classes for longer-term purchasing power considerations. Real estate is one of those asset classes that has historically been discussed as a potential inflation consideration, but it carries its own risks including illiquidity, value decline, and unpredictable income.
Fractional real estate through Realbricks is one way to explore that exposure at a lower entry point. It is a speculative investment, and anyone considering it should review the offering materials carefully and consult a financial professional before investing.
Disclaimer: Investing in real estate involves risks, including the potential loss of capital. This content is for informational purposes only and is not intended as investment advice. Investors should perform their own research and consult with financial professionals before making investment decisions.
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