Understanding inflation

Budgeting

This video outlines how rising prices affect your day-to-day spending and how keeping an eye on your costs can help you manage your budget confidently.

Transcript

Understanding inflation is key to making your money work. Inflation is a measure of how prices rise, which can have a big impact on your budget as costs for things you often buy may change, though it is unlikely that your wages will increase at the same rate.

The Bank of England aims to keep inflation at around 2%. Let’s say the overall rate of inflation rose to 3.5%. That would mean, in theory, your monthly outgoings might go from £600 to £621. Now that might sound manageable, but that is an average figure based on a wide range of goods and services, some of which might have higher or lower rates individually.

Inflation will affect people based on what they typically spend their money on. You might take a closer look at where inflation is felt in your day-to-day life. Take food shopping as an example. If food inflation was to reach as high as 20%, as it has in recent years, that could be a whole £20 extra per week on your food shop alone, if your family’s food shop was around £100. And if you drive a lot, then fuel inflation will affect you more than it does others.

It’s good to have an idea of how your personal spending and budget is impacted by inflation. Over time, increased costs for different areas of your life add up. Without careful review and adjustment of your budget, you might end up using an overdraft or credit to cover basic living costs. This can quickly spiral and is best avoided if at all possible. Inflation affects us all, but it doesn’t hit everyone in the same way. It depends on what you spend your money on. Keeping track of how rising prices affect your own budget can help you stay in control and avoid relying on credit for everyday costs.

Of course, even with careful planning, there are times when money still feels tight. In another video, we’ll look at managing those lean periods and how to prepare for them.

All Adult Learning Modules

Budgeting

Module 1

5 videos

14 minutes

In this module, you’ll explore how budgeting can help you plan ahead and manage the impact of rising costs.

Woman sitting on a sofa in a bright living room, reading a letter and holding an envelope, with a coffee cup on the table nearby.

Earnings

Module 2

7 videos

16 minutes

In this module, you’ll learn how to understand your pay, spot any issues early and explore the different ways you can increase your income.

Smiling café worker in a striped apron holds a wooden board of sandwiches beside a counter, with customers chatting and coffee and pastries in the background.

Freelance

Module 3

8 videos

29 minutes

In this module, you’ll learn what freelancing involves, from getting paid to managing tax, expenses and day-to-day responsibilities.

Woman wearing glasses works on a laptop at a café table, with a red coffee cup beside her and greenery and large windows in the background.

Pensions

Module 4

9 videos

24 minutes

In this module, you’ll explore how pensions work, from the State Pension to workplace and personal pensions, so you can plan ahead.

Debt

Module 5

7 videos

19 minutes

In this module, you’ll learn how borrowing works, how to manage debt responsibly and where to get help if it becomes hard to handle.

Credit

Module 6

6 videos

21 minutes

In this module, you’ll learn how credit works, different types of credit, how repayments are made and how interest and fees are calculated.

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Mortgages

Module 7

9 videos

38 minutes

In this module, you’ll learn how home buying works, the factors that shape affordability and how mortgages influence the overall cost.

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Investing

Module 8

8 videos

28 minutes

In this module, you’ll learn how investing works, how to manage risk and how to grow your money over time.

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