Value of money falls 91% in 40 years
Just £1 million in 1973 would provide the same level of spending power as £10.5 million would today, according to research from Lloyds Bank.
The value of money, says the bank, has fallen by a whopping 91% over the past 40 years.
That means a mere £9.48 in 1973 would give you the equivalent purchasing power of £100 today.
The eroding effects of inflation have chipped away an average of 6.1% from the value of money each year over the past four decades. In that time inflation has ranged from 13.6% to a little more than 2%, where it currently sits.
But while worrying about the influence of inflation on millions of pounds might not be relevant for most people, the effects can be seen just as clearly in the rise in prices of every day goods.
The average price of a pint of lager, for example, has increased 20 fold in the past 40 years. In 1973 you would have likely paid 14 pence for your pint, in 2013 the average across the country was £2.87.
Meanwhile a loaf of bread has increase from 11 pence to £1.30 in the time, instant coffee from 28 pence to £2.67, and a pint of milk has risen 667% from 6p to 46p.
In the same time, the typical cost of a house has rocketed from £16,890 to a whopping £305,391.
No lavish lifestyle
But Ashish Misra, head of investment policy at Lloyds Bank Private Banking, doesn't think people should get too bogged down by the effects of inflation.
"One million pounds is still a lot of money even though inflation has substantially eroded its purchasing power over the past four decades. Although £1 million can't fund the lavish lifestyle it once could, it can still go a long way with careful financial planning," he says.
Dr Ros Altmann is more concerned about the effect on savers though. She says young people are struggling with rents and getting on the housing ladder, older people are struggling on lower pension incomes and the less well-off are battling the ever increasing cost of living.
Misra also warns that even if inflation stays at its current low level, it will still be able to significantly erode the value of money over the next 40 years too.
This article was written for our sister website Money Observer
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).