What leaving your money in the bank really costs

Why does idle money lose value?

Because prices rise and the balance does not keep up. Inflation in Portugal was 2.4% in 2024 and 2.3% in 2025, measured by the Consumer Price Index². Over the same period, the average rate on new household term deposits fell from about 2.2% to 1.36%¹. And that interest is taxed: 28% IRS, withheld at source³.

Do the sums and a typical term deposit pays about 0.98% net a year today, against inflation of 2.3%. The real rate, the one that matters, is about minus 0.9%. Every year that passes, the money in the bank buys a little less. In a current account, where most banks pay nothing, the loss is the whole of inflation.

This is not a criticism of banks or of deposits. It is a description of an interest rate that sits below the rise in prices, and of what that does to savers.

How much does it cost, in euros?

Take a concrete case: 20 000 € kept for ten years, with inflation at the 2.3% the INE measured for 2025. Three scenarios, all computed with this site's tools:

Assumptions: constant 2.3% inflation, deposit interest at 1.36% with 28% tax withheld every year, and an investment at 5% gross a year, also taxed at 28%. The 5% is an illustrative assumption, not a promise: investment returns vary and can be negative in some years. What does not vary is the loss in the deposit.

Notice what the table shows: in the deposit the balance rises by 2 050 €, and the saver still loses 2 400 € of purchasing power. That is why the loss goes unnoticed. The bank statement tells one story, the supermarket tells another.

And for someone who saves every month?

The effect repeats with monthly contributions, only over a longer period. Someone who saves 200 € a month for 20 years puts 48 000 € of their own money in. What happens to it depends almost entirely on where it goes:

In the deposit, the 48 000 € saved with effort are worth, in purchasing power, about 33 600 €. Twenty years of discipline, and inflation ate almost a third. You can reproduce these sums in the compound interest calculator, which already includes tax and inflation.

So money should not be in the bank?

It should. Part of it. The practical rule has two boxes:

1. The emergency fund, three to six months of expenses, stays where it is safe and available overnight: a term deposit with early withdrawal, a savings account or savings certificates. The goal here is not to earn, it is to be there when the car breaks down. Deposits up to 100 000 € per depositor and per bank are covered by the Deposit Guarantee Fund⁴.
2. The money you will not need in the coming years is what this article is about. It is the money that loses to inflation, and the money that has time to earn more than it.

The common mistake is not having money in the bank. It is having all the money in the bank, including what will only be used in ten or twenty years.

What to do with the rest?

That is the question the rest of the series answers, in order. First, why trying to pick the right moment to invest does not work (and why that is good news). Then, what the data say about funds, ETFs and fees. And finally, how to build a simple portfolio and take the first step. None of these steps requires forecasting the market or picking stocks. It only requires seeing that idle money has a cost, and that the cost can be measured.

Before moving on, put your own numbers into the inflation calculator: the balance you have sitting idle, the rate your bank pays you and the years until you need it.