31/03/2026
The Set up 📌
📎1. Bank perspective
- 1,000,000 ( deposit)
-Interest rate ( growth) .09% = 1,009,000
- withholding tax
1,009,000 * .20% = 1,007,200 ( as the new balance)
📎2. The Market's Perspective (Target Balance) 1,051,000
To buy the exact same basket of goods (groceries, fuel, utilities) that cost 1,000,000 on Day 1, the depositor now needs more money because of the 5.1% inflation.
📎3. The Computation of the "Gap" (Wealth Loss)
The "Gap" is the money that was "lost" to the economy because the bank interest couldn't keep up with rising prices.
• Calculation: 1,051,000- 1,007,200= 43,800
📎4. The Final Purchasing Power
If we look at that new bank balance (1,007,200) and convert it back into "Today's Value," we see the true erosion.
• Calculation: 1,007,200/ 1.051=
• Real Value: 958.325
Even though the depositor has 9,000 more in their pocket, they are effectively 43,800 poorer in terms of what they can actually buy.
The Reality Check
This is why staying in a regular savings account during high inflation is often described as "losing money safely.
"Safe" does not equal "Stable" when the cost of living outpaces the cost of money.
