Inflation refers to the general increase in prices of goods and services over time, leading to a decrease in the purchasing power of money. This means that the same amount of money will buy fewer goods and services as time goes on. Inflation can have a significant impact on your savings, as it erodes the real value of your money over time.

For example, if you have $1000 in a savings account with a 2% interest rate, but the inflation rate is 3%, your savings will actually decrease in value over time. This is because the interest earned on your savings may not keep up with the rising cost of goods and services due to inflation.

One way to mitigate the effects of inflation on your savings is to invest in assets that have the potential to outpace inflation, such as stocks, real estate, or inflation-protected securities. These investments have historically provided returns that exceed the rate of inflation, helping to preserve the purchasing power of your savings.

It's important to keep an eye on the inflation rate and adjust your savings and investment strategies accordingly. By staying informed and making proactive financial decisions, you can better protect your savings from the erosive effects of inflation.