Real interest rate

Your real interest rate is the interest rate you earn on an investment minus the rate of inflation.

For example, if you're earning 6.25% on a bond, and the inflation rate is 2%, your real rate is 4.25%. That's enough higher than inflation to maintain your buying power and have some in reserve, which you could use to build your investment base.

But if the inflation rate were 5%, your real rate would be only 1.25%.