compound interest calculator<\/a> shows only nominal values if no adjustment is made. This means it displays a growing balance, but that growth says nothing about how much you will actually be able to buy with it in the future.<\/span><\/p>\u00a0<\/p>
Even in Switzerland, known for its stability, inflation has regained significance in recent years. To understand real returns, it is worth taking a closer look at inflation trends and their effects on long-term investments. <\/span><\/p>Development of inflation in Switzerland<\/b><\/h2>
Switzerland is, by international comparison, a country with low inflation. This is due to its stable currency, the independence of the Swiss National Bank (SNB), and the special structure of its economy. Nevertheless, price increases are also noticeable here, especially during the years 2021 to 2023. <\/span><\/p>Some key figures from recent years:<\/span><\/p>- 2018: around 0.9 percent
<\/span><\/li>- 2019: about 0.4 percent<\/span><\/li>
- 2020: pandemic-related \u20130.7 percent (slight deflation)
<\/span><\/li>- 2021: rund 0,6 Prozent<\/span><\/li>
- 2022: sharp increase to 2.8 percent<\/span><\/li>
- 2023: decline to 2.1 percent
<\/span><\/li>- 2024: stable 1.1 percent<\/span><\/li><\/ul>
Averages:<\/b><\/p>- Over the past ten years, average inflation was around<\/span> 0.6 percent per year.<\/b><\/li>
- Over the past twenty years, around<\/span> 1.0 to 1.2 percent per year.<\/b><\/li><\/ul>
These values are clearly lower than those in the Eurozone or the United States, yet they still have a noticeable effect on purchasing power and therefore on calculations in the compound interest calculator.<\/span><\/p>\u00a0<\/p>
Effects on the population<\/b><\/h2>
Inflation appears in many areas of daily life. Energy, mobility, and food have become noticeably more expensive. Families must plan their budgets more carefully, compare prices more often, and postpone larger purchases. The effect is particularly strong for rent and mortgages. Since the SNB reacts to rising inflation with higher key interest rates, the cost of financing increases.<\/span><\/p>\u00a0<\/p>
For savers, the situation is also challenging. Those who leave their money in a savings account with a low interest rate lose purchasing power every year when inflation exceeds one percent. The same applies to pension funds or long-term investments \u2013 only a return above the inflation rate leads to real asset growth.<\/span><\/p>\u00a0<\/p>
Protection against inflation<\/b><\/h2>
Because the inflation rate is always calculated as an average, individual situations can differ significantly. For example, someone who spends a large share of their income on energy or food will feel price increases more strongly. One way to reduce one\u2019s personal inflation rate is to spend more consciously and cut expenses in particularly affected areas where possible. <\/span><\/p>For investors, <\/span>negative real interest rates<\/b> make it unattractive to keep money long-term in savings, current, or call accounts. These offer safety but lose purchasing power year after year. A better strategy is to invest broadly and over the long term \u2013 at least 15 years \u2013 in asset classes such as equity ETFs, which historically provide returns well above inflation.
<\/span>.<\/span><\/p>Products with built-in \u201cinflation protection\u201d do exist in the Swiss market, but they are usually not worthwhile. They often generate additional costs that reduce overall returns. Those who invest consistently and long-term can offset inflation risk even without such specialized products.
<\/span><\/p>Causes of inflation<\/b><\/h2>
The causes of inflation are diverse and often overlap:
<\/span><\/p>- Costs<\/b>: Sharp increases in energy, transport, or raw material prices can trigger a chain reaction. Companies pass higher costs on to consumers, driving prices up.
<\/span><\/li>- Demand<\/b>: When demand for certain goods exceeds supply, prices rise. In Switzerland, this was recently visible in the housing market.
<\/span><\/li>- Exchange rate<\/b>: A strong depreciation of the Swiss franc would make imports more expensive, raising domestic prices. Conversely, a strong franc dampens inflation.
<\/span><\/li>- Money supply<\/b>: Excessive money supply growth relative to production can fuel inflation. The Swiss National Bank therefore carefully manages liquidity.
<\/span><\/li>- Wages:<\/b> Rapidly rising wages can increase production costs and trigger a wage\u2013price spiral.<\/span><\/li>
- Politics: <\/b>Political decisions such as minimum wage laws, energy policy, or international tensions can directly or indirectly influence inflation.<\/span><\/li><\/ul>
Inflation and the compound interest calculator<\/b><\/h2>
A compound interest calculator is a useful tool to understand how money grows over time. It calculates how a starting amount becomes a larger final amount through annual interest. But without adjusting for inflation, it shows only nominal growth, not real purchasing power.
<\/span><\/p>The rule of thumb is:
<\/span><\/p>Real interest \u2248 nominal interest \u2212 inflation rate
<\/b><\/p>
For more precise calculations, the so-called Fisher equation is used:
<\/span><\/p>(1 + nominal interest) = (1 + real interest) \u00d7 (1 + inflation)<\/span><\/p>\u00a0<\/p>
Example calculation using the compound interest calculator <\/b><\/h2>
To demonstrate the effect of inflation, let\u2019s take a simple example:
<\/span><\/p>- Starting capital:<\/span> CHF 10,000<\/b><\/li>
- Nominal interest rate: <\/span>6 percent per year<\/b><\/li>
- Inflation:<\/span> 1.1 percent per year<\/b><\/li>
- Duration: <\/span>25 years<\/b><\/li><\/ul>
Scenario A \u2013 without inflation
<\/b><\/p>
Formula:<\/span><\/span>
10,000 \u00d7 (1 + 0.06)^25
Calculation:
Final capital = 10,000 \u00d7 4.292 = CHF 42,920
Nominal profit: CHF 32,920
<\/span><\/p>Scenario B \u2013 with inflation (simplified method)<\/b><\/p>
Real interest = 6.0% \u2212 1.1% = 4.9%<\/p>
Formula:
Final capital = 10,000 \u00d7 (1 + 0.049)\u00b2\u2075<\/p>
Calculation:
Final capital = 10,000 \u00d7 3.294 = CHF 32,940
Real profit: CHF 22,940<\/p>
Scenario C \u2013 exact Fisher calculation
<\/b><\/p>
Real interest = (1 + 0.06) \u00f7 (1 + 0.011) \u2212 1 = 4.85%<\/p>
Formula:
Final capital = 10,000 \u00d7 (1 + 0.0485)\u00b2\u2075<\/p>
Calculation:
Final capital = 10,000 \u00d7 3.244 = CHF 32,440
Real profit: CHF 22,440<\/p>
Conclusion of the calculation<\/b><\/h2>
The difference is enormous. Without inflation, after 25 years you would have CHF 42,920, but in terms of purchasing power only around CHF 32,440 remain. <\/span>Inflation thus reduces the value of assets by more than CHF 10,000, even though the account balance looks impressive at first glance.<\/p>Summary<\/b><\/h2>
Inflation in Switzerland is low by international standards, but far from insignificant. With an average of 0.6 percent over the past ten years and about 1.0 to 1.2 percent over twenty years, it changes the real return of every investment. A compound interest calculator without inflation adjustment shows only nominal values and can give a false sense of security.
<\/span><\/p>The example with CHF 10,000, a nominal interest rate of 6 percent, and an inflation rate of 1.1 percent over 25 years shows this clearly: nominally, the capital grows to CHF 42,920, but in real terms only CHF 32,440 remain. The difference of over CHF 10,000 makes it clear that inflation must be included in every calculation. Only then can savings goals, retirement planning, and investments be realistically planned.
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