Pupils assess and mitigate the impact of inflation on their savings.
Scenario
After reading about inflation in the news, Ade is researching where best to deposit his savings. As part of his research, Ade learns the following:
- Inflation is the rate of price increases over a period of time.
- Nominal value refers to an item’s face value. For example, a £50 note has a nominal value of £50).
- Real value refers to an item’s nominal value after it has been adjusted for inflation. For example, if inflation is 5% a year, then next year £100 will only buy roughly £95 worth of things in today’s prices.
- Banks pay interest to savers, which increases the value of their savings and protects those savings against inflation.
Ade applies these learnings to try to shield his savings from the effect of inflation.
Curriculum references
| National Curriculum 16 | Set up, solve and interpret the answers in growth and decay problems, including compound interest and work with general iterative processes. |
| OCR 5.03a | Calculate simple interest including in financial contexts. Solve problems step-by-step involving multipliers over a given interval, for example, compound interest, depreciation, etc. Express exponential growth or decay as a formula. Solve and interpret answers in growth and decay problems. |
| AQA Edexcel R16 | Set up, solve and interpret the answers in growth and decay problems, including compound interest. And work with general iterative processes. |