Inflation at 7%: is your savings actually growing?

Your bank balance can go up while your money quietly shrinks. With Philippine inflation above 6% in 2026, most safe places to keep money are losing buying power after tax, and only a few are still keeping up.

What is happening to prices

Prices are rising fast, and September could be the worst month in about three and a half years.

Inflation was 6.1% in August 2026, after 6.2% in July. The Bangko Sentral ng Pilipinas expects September to land between 6.4% and 7.4%, driven by food prices after heavy rains, higher oil prices from the Middle East conflict, and a peso that fell past ₱62 to the dollar. The top of that range would be the highest reading since early 2023.

The BSP has raised its policy rate three times this year, to 5%, and economists expect it could raise again before the year ends.

Nominal vs real return

Your real return is what your money earns after tax and after inflation, and it is the only number that tells you if you are getting richer.

Banks advertise the nominal rate, like 5% a year. Take out the tax, then compare what is left with inflation. If inflation is higher, the pesos you get back buy less than the pesos you put in.

A simple way to estimate it: after-tax rate minus inflation.

How each option does at 6.1% inflation

Here is ₱100,000 for one year in each option, with August's 6.1% inflation. The rates are round illustrations, not quotes from any bank.

Savings account at 0.5%: After the 20% tax, you earn 0.40% and end with ₱100,400. In today's pesos, that buys what ₱94,628 buys now. Real return: about -5.4%.

Digital bank savings at 4%: After tax, 3.20%, ending at ₱103,200. In today's pesos, about ₱97,267. Real return: about -2.7%.

Time deposit at 5%: After tax, 4.00%, ending at ₱104,000. In today's pesos, about ₱98,021. Real return: about -2.0%.

REIT with a 6% dividend yield: After the 10% dividend tax, 5.40%, before any change in the share price. In today's pesos, about ₱99,340. Real return: about -0.7%, plus or minus the price move.

MP2 at 7.12%: Tax-free, so 7.12%, ending at ₱107,120. In today's pesos, about ₱100,961. Real return: about +1.0%.

If September inflation comes in at 7%, every number above drops by about another percentage point, and MP2's real return falls to roughly zero.

What this means for your money

It does not mean you should pull everything out of the bank, but it does change where each peso should sit.

Keep your emergency fund where it is

Your emergency fund is supposed to be safe and reachable, not to beat inflation. Losing a few percent of buying power is the price of having cash the day you need it. Just move it to a better-paying insured account if yours pays almost nothing. See How big should your emergency fund be?

Stop leaving extra cash in a near-zero account

Money sitting in a basic savings account loses about 5% of its buying power a year at today's inflation. Anything beyond your emergency fund should be working harder.

Match long-term money to long-term options

For money you will not touch for five years, MP2 is one of the few safe options still ahead of inflation after tax. See Pag-IBIG MP2 for beginners.

REITs and stocks can beat inflation over long periods, but their prices can fall in the short term, especially while rates are rising. See REITs vs time deposits.

Watch rising deposit rates

When the BSP raises rates, banks often raise what they pay on savings and time deposits too. Compare offers every few months instead of renewing automatically.

Protect your budget, not just your savings

Inflation hits what you spend before it hits what you save.

Recheck your monthly essentials at today's prices, especially food, fuel, and transport. If your budget was set last year, it is probably short.

Payday is the best moment to adjust. Move your savings first, then live on what is left, so rising prices eat into spending instead of savings.

PesoHero will show your net worth in today's pesos, so you see whether your money is really growing. Join the waitlist to hear when it launches.

Sources

• Tribune: September inflation seen rising within BSP forecast
• Philstar: BSP policy rates hiked by 25 bps
• Rappler: As peso lingers at record-low ₱62, what does it mean for Filipinos?
• GMA News: Pag-IBIG announces record ₱64.34B dividend for 2025, MP2 yields 7.12%
• Rappler: What RA 12214 changes for interest income
• Republic Act No. 9856, the REIT Act of 2009 (Lawphil)

This is general information, not investment advice. We will update this article when the Philippine Statistics Authority releases September inflation.