Inflation Explained in
Simple Terms: Why Your Money Doesn’t Go as Far
as It Used To

Back in 2004, you could walk into a corner shop with just 10p and walk out with a packet of Space Raiders crisps. Fast forward to 2024, and that same packet now costs around 40p. That’s a 300% price increase over 20 years—for exactly the same product.

Now let’s talk baked beans. In 1991, you could buy a six-pack of Heinz baked beans (450g tins) for just £1.40. Today, one of the best deals around is £5.25 for six tins—but the tins are now smaller, at 415g. That’s not just inflation—it’s shrinkflation: when products quietly get smaller but the prices either stay the same or go up.

These everyday examples show how inflation works in real life. Over time, the cost of goods and services increases, meaning the same amount of money buys you less than it used to.

In simple terms, inflation is the gradual rise in prices across the economy over time. When inflation goes up, each pound in your pocket has less purchasing power.

It's why a £50 grocery shop in 2010 feels like it barely gets you half as much in 2024.

Inflation is usually measured as a percentage increase in prices over a given period. For example, if the inflation rate is 5%, it means that, on average, things cost 5% more than they did a year ago.

Some inflation is normal—even healthy—for an economy. It encourages spending and investment, rather than people hoarding cash. But when inflation rises too quickly (like we’ve seen in recent years), it can start to squeeze household budgets, reduce savings value, and make long-term financial planning more difficult.

Inflation impacts everyone, whether you notice it or not. Here’s how:

Day-to-day spending: Your weekly shop, fuel costs, and energy bills all creep up over time.

Savings: Money sitting in a low-interest savings account actually loses value when inflation outpaces the interest you're earning.

Retirement: If you're not accounting for inflation, your pension pot might not stretch as far as you think in the future.

Investments: Inflation eats into real returns. An investment earning 5% a year may sound good—until you subtract 4% inflation.

The key takeaway? Inflation may be invisible day to day, but it quietly chips away at your financial health over time.

The good news is there are ways to protect yourself against inflation—and even use it to your advantage:

Invest, don’t just save: Over the long term, investing in assets like stocks, ETFs, or diversified portfolios can outpace inflation and grow your wealth. Cash savings rarely do.

Keep an eye on interest rates: Make sure any savings you do keep in cash are earning competitive interest—look at ISAs, high-interest accounts, and bonds.

Budget for rising costs: Build inflation into your long-term plans. That includes pensions, education costs, and big-ticket spending.

Avoid lifestyle creep: As your income rises, don’t let your spending rise at the same rate. Saving the difference can help offset inflation’s effects over time.

Inflation might sound like an abstract economic concept, but its impact is very real. From crisps and beans to your savings and investments, it affects how far your money goes and how secure your financial future feels.

The important thing is to be aware—and to act. By understanding inflation and making smart financial choices, you can protect your money’s value and stay ahead of rising costs.

Because at the end of the day, it’s not just about what you earn—it’s about what your money can do for you over time.