According to new data from the Office for National Statistics, INFLATION soared to 6.2%, which led to a reduction in household budgets.
Rates rose another 7 percentage points in February, up from 5.5% in January, an astonishing high not seen in decades.
This means that inflation is now at its highest level since March 1992, when it soared to a record 7.1%.
Inflation is a measure of how much the prices of goods and services have changed over time.
When it rises, the prices of everyday items and essentials, from groceries to fuel and transportation costs, also rise, meaning you’ll pay more just to get by.
The ONS said rising energy, fuel and food prices were the biggest contributor to the latest rise in inflation rates.
This is not the last increase in inflation that the British should expect – experts predict inflation to rise to 7% by April.
How will this affect the family’s finances?
Inflation has a double impact on households.
First, you will notice that the cost of everyday essentials is rising.
This means that your weekly shopping will be higher at the supermarket and your bills at home will also go up.
The average price increase is usually based on how much things cost today compared to last year.
So if the inflation rate were 2%, that means that what was worth £1 a year ago would be worth £1.02 today – it may not sound like much, but it soon adds up when everything go up.
Adding to the harm for households is the fact that wages have not kept up with inflation last year, so Britons have less money in their pockets to shell out for all the takeoff costs.
If your salary can’t keep up with rising rates, you may find it harder to afford living expenses.
This is because higher inflation means your money doesn’t go that far and you end up spending more as a result.
The second effect of inflation is that it eats away at the value of your savings.
If inflation is higher than the interest you receive on your savings, you are actually losing money every year.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “If you make 0.01% on your savings with a typical high street easy-access account and inflation averages 5% over the next 12 months, someone then with £10,000 in savings they will lose £499 of the purchasing power of their money.
“If you upgrade to the most competitive easy access account by paying 0.73%, you can keep an extra £72 of your purchasing power.”