Building up capital

Why savings lose their value

Life gets more expensive every year. And the money you save barely earns interest. Why is that? And how can get more out of your money?

Continuing low interest rates

Since 2016, the interest rate for most Belgian savings accounts has sunk to around 0.11% (1). There’s little chance of any dramatic improvement to this situation occurring any time soon. It is true that the European Central Bank (ECB), which controls interest rates on the financial markets, announced its desire to increase interest rates from July 2022. However, those interest rate increases will probably remain modest; it's very unlikely that rates will return to the levels of the past. A possible increase in the market rate of interest may not immediately translate into an interest rate rise for savings accounts.

Rising inflation

Today, a savings account containing 1,000 euro will earn just 1.10 euro over a year. But while interest rates remain at rock-bottom levels, inflation (the benchmark for changes in the price of goods and services) is rising, partly due to rising energy and food prices due to the war in Ukraine.

What is inflation and how is it calculated?

In Belgium, inflation averaged 2.2% per year (2) between May 2016 and May 2022. The rate of year-on-year inflation soared to 9% in May 2022. In the same period, most savings accounts barely yielded 0.11%. 


Inflation also means that the value of money, i.e. the euro, decreases. The higher the rate of inflation, the greater the loss of value. If the cost of goods increases, we can buy less today than we could yesterday with the same amount of money. Therefore, we lose purchasing power.

In Belgium, inflation averaged 1.6% per year between January 2016 and September 2021(2). In fact, inflation reached 2.7% in August 2021. In the same period, most savings accounts barely yielded 0.11%. Therefore, the money saved in those accounts lost value.

Investing to beat inflation

It’s a good idea to have a bit of money set aside just in case. But if you have a savings buffer of 3 to 6 months' net income and you don’t think you’ll need to use the remaining money for a few years, then investing can be a smart choice. 

Of course, when you invest, there’s always a risk you could lose your capital. But on the flip side, investing can deliver higher returns, especially if you do it long-term. And with patience and the right choices, your investments could snowball. One way to achieve this is by reinvesting the income your investments earn (such as dividends). These reinvested earnings can then generate their own returns. Which means your money will compound. 

The number of investors has doubled in 2 years

More and more people are realising their savings aren’t delivering returns. And in recent years, many Belgians have chosen to start investing. In a matter of just 2 years, the number of Belgians who invest has doubled to 830,000. And most of those people invest in shares(3). 

But does investing mean you’ll need to take more risk? Yes, because there’s no such thing as a risk-free investment. Fortunately, there are simple solutions for keeping the risks lower. For example, you could spread your investments out (diversify) rather than put all your eggs in one basket.

Want tips to get started with investing the right way?

Investing with ING

Every investor is unique. Some like to do it all themselves, while others prefer a bit of expert help. But no matter whether you’re a beginner or have been investing for years, you’ll find the right investing solutions for your goals with ING.