Beat Inflation Now: 6 Smart Tips Including Loyalty Cards, Investing, and Switching Savings Accounts

Grasping the Concept

Inflation is a measure of how prices increase over a period. The Office for National Statistics (ONS) officially tracks this metric.

The ONS uses a standard basket of around 700 common goods and services to calculate the consumer prices index (CPI), which reflects the total cost of the basket. The change in the CPI from one year to the next is reported monthly as the headline inflation rate. Previously, the retailer prices index (RPI), typically a higher rate, was used for measuring inflation and is still employed for certain purposes like determining regulated train fares.

As of October 2025, the CPI inflation rate stands at 3.6%. This indicates that an item costing £100 last year would now cost £103.60.

Although the inflation rate has decreased from 3.8% in September, it doesn’t imply that prices have ceased rising; rather, the increase has slowed. An inflation rate of 0% is necessary for prices to remain stable, while a negative rate would lead to price declines, known as deflation.

Inflation affects purchasing power, reducing what can be bought with the same amount of money year after year. It also influences interest rates, as the Bank of England aims to keep inflation near 2%.

High inflation usually leads to increased interest rates to curb spending and slow down inflation by making borrowing costlier and saving more appealing. Conversely, the Bank might lower rates when inflation decreases.

These changes directly affect mortgage costs and the interest rates on savings.

Determine Your Individual Rate

Shopping habits vary widely among individuals, and big-ticket items like cars or expensive vacations, included in the CPI basket, aren’t purchased annually by most.

The ONS offers a tool to calculate your “personal inflation rate” based on your specific expenditures.

By inputting details about your spending, such as housing, utilities, food, transportation, and leisure, the tool compares your personal inflation rate to the national average.

Understanding your personal inflation rate is crucial as it varies significantly across households, especially for those who allocate a large portion of their income to essentials like food and energy.

Being aware of your personal inflation can help you identify the most significant impacts on your budget and prompt changes in spending behavior, such as modifying grocery shopping habits if you’re spending significantly more on food than previously.

Overcome Food Inflation

Food prices, including staples like bread, fruits, vegetables, dairy, and meat, have risen faster than general inflation over the past year. Recent data from Worldpanel by Numerator indicates that grocery inflation stood at 4.7% in the last month, a slight reduction from 5.2% in the earlier period.

Shopping at budget supermarkets such as Aldi, which is consistently less expensive according to Which? research, or Lidl, can help manage food inflation. If you shop at other stores, joining their loyalty programs can offer access to better deals.

Further cost reductions can be achieved by setting a weekly budget, adhering to a shopping list, opting for store brands, buying bulk items on genuine discounts, and choosing seasonal or frozen products, which usually offer better value.

Combat Rising Energy Costs

Although energy prices have decreased from their peak in 2023, they remain significantly higher than pre-crisis levels.

Securing a fixed-rate tariff can shield you from subsequent increases. Some plans, like the 12-month fixed deal from Outfox Energy, offer substantial savings compared to the upcoming energy price cap set by Ofcom at £1,758 from January 1, 2026.

Simple measures like draught-proofing your home and only heating necessary rooms can help keep energy costs down during colder periods. Additionally, turning off unused lights and appliances and using eco-friendly settings can further reduce energy consumption.

Opt for a High-Yield Savings Account

Inflation can deplete the real value of money in savings accounts. If the interest rate of your savings is below the inflation rate, your purchasing power decreases, even if the account balance grows.

Data from Moneyfacts shows that about half of the existing savings accounts currently offer rates above the inflation rate of 3.6%. To protect and grow your savings against inflation, transferring your funds to these accounts is advisable.

In the realm of easy access savings, online banks offer the most competitive rates. For instance, Sidekick provides a rate of 4.48% AER, which drops to 3.48% after six months, on balances exceeding £10,000. Cahoot and Chip offer rates of 4.4% and 4.37% respectively.

Currently, the rates for one-year fixed-rate bonds are comparable to those of easy access accounts, with LHV Bank offering the best rate at 4.46%. These bonds typically allow significantly higher deposits, up to £1 million in the case of LHV’s one-year bond.

The situation for savers has improved significantly from October 2022, when inflation peaked at 11.1%, making it hard to find a savings account that could outpace it.

Explore Investment Options

For long-term savings, investing might be a more effective strategy to safeguard your funds against inflation.

To outpace inflation, investments in assets that yield returns above the current interest rates are necessary. Historically, stocks and shares have offered this potential, often exceeding inflation rates, although this is not always guaranteed.

Investing involves risks, but diversifying your investments across different asset classes like equities, bonds, and real estate can protect your portfolio from inflation fluctuations. Starting early, making regular contributions, and maintaining a long-term focus can help your investments not only keep up with inflation but also potentially increase in real value.

While finding investments that are completely secure against inflation is challenging, certain government bonds known as index-linked gilts can offer some protection. These bonds adjust your principal investment according to the RPI and provide regular interest payments, with the full adjusted amount paid upon maturity.

Gold is often considered a stable hedge against inflation, maintaining or increasing in value as the purchasing power of currency falls. However, unlike other long-term investments, gold does not produce income and can be quite volatile, so while it may preserve value, it is not always the best performer in comparison to other assets.