Why your money is worth less and less (and what you can do)

With €1,000 today you buy less than a year ago. Not because you lost anything: the money is still in your account. What has changed is what it is worth. In September 2026, prices in Spain were rising 4.9% a year (INE). If your savings don't grow at least that fast, every month you are a little poorer without having spent a cent.

This article explains why it happens, who causes it and what you can do. You don't need to know any economics to follow it.

The world changes, and your wallet feels it

A pandemic, a war that sends energy prices soaring, an ageing population, a technology that changes how we work: each of these changes alters what it costs to produce things and, therefore, what you pay for them. The economy is not something for offices; it is the price of your groceries, your rent and your mortgage.

To understand how it affects you, just follow three words: interest rates, debt and inflation.

The price of money: interest rates

An interest rate is the price of borrowing money. Ultimately it is set by the European Central Bank (ECB), which today pays banks 2.50% on their deposits (ECB). That price spreads to everything: your mortgage (12-month Euribor averaged 3.247% in September), what your bank pays on your savings and what the State pays on its debt.

When the ECB raises rates, borrowing gets more expensive and people spend less, which helps slow prices down. When it cuts them, the opposite happens.

The State has a mortgage too: public debt

When a government spends more than it takes in, it borrows the difference (the deficit). The sum of all those loans is the public debt. In Spain it already equals 101.4% of everything the country produces in a year (GDP) (Banco de España, June 2026).

Like any mortgage, that debt pays interest. And this is where higher rates come in: while money was almost free, the State borrowed at rates close to zero. Now, every time that debt matures, it has to be renewed at much higher rates.

Sources: Spanish Ministry of Finance (2025, final figure) and Funcas (October 2026 forecasts).

Those more than €40 billion a year don't go to hospitals, roads or pensions: they go to paying interest. And according to Funcas, the bill could approach €64 billion by 2031.

Fiscal irresponsibility

Since 2008, Spain's public accounts have not closed a single year with a surplus: more has been spent than collected even in growth years, which is precisely when you should save for the next crisis.

It is not one party's problem but one of incentives. A politician governs for four years; debt is paid over decades. Spending today wins votes today; balancing the books loses them. So the bill is passed on to those who can't vote yet: the young and those not yet born.

How a currency is debased

What does a State do when its debt is too large to pay off with taxes? Historically there is a quiet way out: let money lose value.

If prices rise 5% a year and wages and tax revenue rise with them, the debt (a fixed amount of euros) weighs a little less each year. Inflation works like a tax nobody votes for: it transfers wealth from savers to debtors, and the biggest debtor in the country is the State itself.

Central banks are part of this story. Over the last decade the ECB bought enormous amounts of public debt to keep rates low. That made it cheaper for States to borrow, but it also created a lot of new money. When more money chases the same goods, each euro buys less: that is monetary debasement.

We have to be rigorous: inflation is not only caused by that. Energy, bottlenecks and wages also push it. But when the interest you earn on savings is lower than inflation, the result for you is the same.

−2.4 pointsGap between the ECB deposit rate (2.50%) and September 2026 inflation (4.9%). It is what money earning only the official rate loses each year in purchasing power.

This is the effect on €1,000 kept in an account that pays nothing, if inflation stayed at 4.9%:

Own calculation: 1,000 ÷ 1.049ⁿ. Illustrative assumption; actual inflation will vary each year.

What it means for your wallet

• Your savings in the bank lose value every year inflation exceeds what you are paid.
• Your salary buys less if it rises less than prices, even if the number on your payslip grows.
• If you have fixed-rate debt, inflation works in your favour: you repay euros that are worth less.
• If you have variable-rate debt, higher rates make your payments more expensive.

How to protect yourself

There is no recipe that works for everyone, but there are principles that repeat throughout history:

1. Keep a cushion, not a mountain of cash. Emergency money (a few months of expenses) should be available. The rest, sitting idle in an account, erodes.
2. Own things that rise with prices. Companies able to raise prices without losing customers pass inflation on to their sales. That is why, over the long run, stocks have protected purchasing power better than cash, at the cost of enduring falls along the way.
3. Look at the real rate, not the nominal one. A 3% deposit with 5% inflation makes you lose 2% a year. What matters is what is left after inflation.
4. Diversify. Real assets (property, commodities, gold), inflation-linked bonds and companies in different sectors behave differently in each phase of the cycle. None is infallible; together they reduce risk.
5. Watch the fees. 2% a year in fees, added to inflation, eats a large part of any return.

And how to take advantage of it

Change also opens up opportunities. With higher rates, bonds pay something again after years at zero. Moments of fear in the markets put excellent companies on sale. And whoever understands what is happening decides better than whoever only reads the headlines.

That is the goal of Rincón Monetario: to explain every month what is moving in the economy, analyse companies rigorously and publish reasoned investment theses, with their risks, so you can learn to make your own decisions. The next step is our method for analysing a company.

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• #public debt
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