What Is Inflation? How to Protect Your Savings from Inflation

Inflation is the general, sustained rise in the prices of goods and services over time. Its effect is that the same amount of money buys a little less every year, which is why it pays to know how to protect savings from inflation. In Spain it is measured by the IPC (Índice de Precios de Consumo, the Spanish consumer price index or CPI), which the INE, Spain's National Statistics Institute, publishes every month.

That is the definition. Now for the real problem.

You have €20,000 in the bank. You don't touch it. You are "protecting" it. Ten years from now it will still be €20,000: the number doesn't move. What you can buy with it does. With 3% annual inflation, that money will buy what €14,882 buys today. That is more than €5,000 of purchasing power gone, without anyone stealing anything and without a single day of red on the markets.

How inflation works

When there is inflation, more money is circulating than real output can absorb, and prices adjust upwards. The European Central Bank (ECB) targets 2% a year, a level it considers healthy because it encourages spending and investment rather than hoarding cash.

Reality has been above that target for years. In July 2022, Spain's year-on-year IPC hit 10.8%, the peak of the recent series. In July 2026 it picked up again to 3.5% a year, three tenths of a point above June, with core inflation at 3.0%. The INE attributed the rise to higher fuel and electricity prices.

Over the last decade, prices in Spain have risen by a cumulative 23-24% or so. What cost €1,000 in 2015 now costs around €1,240.

And there is a detail that is often overlooked: inflation doesn't reverse. If something costs 20% more than it did three years ago, it won't go back to its old price when the IPC falls. A lower IPC means prices are rising more slowly, not that they are going down. The purchasing power lost during that period doesn't come back.

What inflation costs your savings

Assume average inflation of 3% a year. It is a middle-ground assumption: above the compound average of the last decade, below the July 2026 figure.

Calculation: nominal value divided by (1 + 0.03) raised to the number of years elapsed.

In twenty years your €20,000 keeps 55% of its real value. Almost half of its purchasing power evaporates, while your bank statement always shows €20,000.

On top of that, most current accounts in Spain pay between 0% and 0.1%. With those numbers, the real loss isn't a risk you can manage: it is a yearly certainty.

Why the bank doesn't solve the problem

The bank is safe in one specific sense: the money doesn't disappear. Safe doesn't mean it holds its value.

These are the usual options and what they paid in July 2026, according to the Spanish comparison sites Rankia and Finect:

Standard current accounts are still at 0-0.1% TAE (the Spanish equivalent of AER or APY). With the IPC at 3.5%, the real loss is around 3.4 percentage points a year.

Interest-bearing savings accounts are more competitive than many people think. Revolut launched a promotion at 3.51% TAE, Trade Republic keeps 3.04% with no conditions and no balance limit, and Bankinter, Openbank and MyInvestor are around 2.5%. It is the sensible option for money you need to keep liquid. Even so, with the IPC at 3.5%, even the best of them barely break even with inflation, and several of those rates are promotional with an expiry date.

Fixed-term deposits move in similar ranges, with your capital locked up for months or years.

None of these products is a bad idea for an emergency fund. The problem arises when they are used as the main long-term savings strategy. There, the arithmetic works against you every single year.

How to protect savings from inflation: the assets that have held up best

Here there is a distinction that matters.

Nominal assets (cash, deposits, fixed-coupon bonds) have their value fixed in absolute numbers. If your bond pays 2% and inflation goes to 3.5%, you lose in real terms even if you collect every coupon on time.

Real assets (property, commodities, shares in companies with pricing power) are part of the real economy, so their value tends to move with prices.

Stock market and indices

The S&P 500 has historically returned around 10% a year in nominal terms, about 7% after inflation. Companies can pass higher costs on to their customers, and that partly protects shareholders. In exchange there is volatility: in 2022, with high inflation and rising interest rates at the same time, indices fell sharply.

Gold

It works as a safe haven at times of high uncertainty. It doesn't generate recurring income: it either appreciates or it doesn't. It is a hedge, not a source of income.

Real estate

Real estate holds up well for three reasons that work at the same time. Rents are updated in line with official indices, land and construction get more expensive when everything else does, and in the meantime the asset produces income.

The specific numbers: idealista, Spain's leading property portal, put the gross yield on buying a home to rent out at 6.5% in the second quarter of 2026, compared with 7.2% a year earlier. The drop is explained by purchase prices rising faster than rents.

Two caveats that are almost never mentioned. The first is that the 6.5% is gross: the report itself makes clear that it doesn't deduct taxes, insurance, community fees, refurbishments, maintenance, vacant periods or financing costs. The second is geographic, and it runs counter to intuition: the big cities yield less. Madrid came in at 4.7% and Barcelona at 5.2%, while Jaén (a province in Andalusia) topped the table at 7.4%. You will find the breakdown by asset type and region in our analysis of real estate investment returns in Spain.

And then there is the usual barrier. For a €200,000 flat you need between €40,000 and €60,000 for the deposit plus costs, and the average Spanish household's savings fall short of that. And if you need your money back, you can't sell 10% of the flat.

Tokenization opens real estate to people without a €60,000 deposit

Tokenization digitally splits an investment in a real property into fractions, much like a company divides its capital into shares. Each token represents a proportional part of that investment and of the returns the asset generates: rents, interest or the capital gain on sale.

No notary, no mortgage, and no dealing with tenants or refurbishments. Compared with other ways of investing in bricks and mortar, the difference comes down to four points.

You start from €500. Buying directly requires €60,000 or more between the deposit and costs. A private real estate fund usually starts at €10,000. At Reental the minimum ticket is €500, with tokens of around €100 each.

You can exit without waiting for the building to be sold. There is a P2P secondary market where you can list your tokens for sale whenever you want, and at market prices the deal usually closes within days. It is potential liquidity, not a guaranteed sale, but compared with a flat (months of process, or discounts of more than 30% if you are in a hurry) the room for manoeuvre is in a different league. You can also sell part of your position and keep the rest, something impossible with a whole property.

You genuinely diversify. With the capital a single flat in Spain requires, you can be spread across six countries and three different strategies: buy-to-let, developer loans and flipping. Reental's portfolio is currently spread across Spain, the United States, Mexico, the Dominican Republic and the UAE. Concentrating all your wealth in one asset, in one city and with a single tenant is the risk that almost nobody accounts for in traditional investing.

Your tokens work as collateral. Through Reenlever you can use your tokens as collateral and obtain liquidity of up to 75% of their value, with no fixed repayments, no CIRBE check (the Bank of Spain's credit risk register) and none of the paperwork of a mortgage. In other words, you can take money out of your investment without unwinding it, something that with a property means refinancing or selling.

Source: Reental comparative analysis. You can see the details in our article on the differences between real estate crowdfunding and tokenization.

As for returns, the average achieved at Reental over the last year stands at 16.25%. As of September 2025, the platform had a five-year track record, 106 funded projects, 32,200 investors and a historical average IRR of 13%, with no project closed at a loss. Returns are distributed periodically and can be reinvested immediately, which puts compound interest to work at a frequency that traditional real estate investment doesn't allow.

The returns shown are projections or historical data and are not guaranteed. Real estate investment carries risks, including the loss of capital. Past performance is not a guarantee of future returns.

How much you need to earn so you don't lose

With the IPC at 3.5%, your savings need to earn at least that 3.5% just to stand still. Anything above that threshold is a real gain.

Arithmetic difference between the gross return and the July 2026 IPC (3.5%). These are gross figures: they don't deduct taxes, fees or costs, which in the case of traditional letting can be significant. Each product has a different risk and liquidity profile, and they are not directly comparable with each other.

The gap between not investing and investing wisely builds up year after year. Capital earning 7% a year in real terms multiplies by 3.8 in twenty years. The same capital sitting idle in a current account, with 3% inflation, ends up at 55% of its starting value.

Before you move anything

A warning we have to make: investing to protect yourself from inflation makes sense with money you won't need in the short term.

Before putting a single euro into any asset, build a cushion of three to six months of expenses in a liquid account. That money has to stay accessible even if it loses some value each year. For the rest, letting inflation erode it is an avoidable cost with the tools available today.

As for the tax treatment of each product, always check with your trusted tax adviser: it depends on where you are resident and on your personal situation.

Key takeaways

Inflation isn't a headline on the evening news. It is a slow process that reduces the real value of your savings every year you leave them idle. It doesn't take the 10.8% of July 2022 for the damage to be serious: at today's 3.5%, you lose almost 30% of your purchasing power in ten years.

Protecting yourself doesn't require being a financial expert. It requires understanding that idle money loses value, and knowing which assets have historically held up best. Real estate is one of them, and today you no longer need to put together a €60,000 deposit to access it. If you want to see how inflation affects house prices specifically, we cover it in how inflation affects house prices.

You can see the available assets, their terms and their projections on the Reental platform.

Frequently asked questions

What is inflation, in simple terms?

It is the general, sustained rise in prices over time. When there is inflation, the same amount of money buys fewer things than before. In Spain it is measured by the IPC (the Spanish consumer price index), which the INE publishes every month.

What is inflation in Spain right now?

The IPC stood at 3.5% a year in July 2026, three tenths of a point above June, with core inflation at 3.0%, according to the INE flash estimate. That is above the ECB's 2% target.

How can I protect my savings from inflation?

Your money needs to earn more than the IPC. Savings accounts barely keep pace with it. Historically, real assets such as property or equities have delivered returns above inflation over the long term, always taking on risk and with money you will not need in the short term.

Is gold or real estate better for protecting against inflation?

They are different things. Gold is a hedge against crisis scenarios, but it does not generate income: it either appreciates or it does not. Real estate produces income while you hold it, plus the possible appreciation of the asset. Neither eliminates risk.

What happens if I do nothing with my savings?

You lose in real terms, gradually. With 3% inflation, your money keeps 74% of its purchasing power after ten years. If the 3.5% of July 2026 were sustained, it would keep 71%.