The school shop has 10 sweets. You, Ali, Ben and Cara have 10 coins in total. One coin buys one sweet.
A magic printer makes 10 more coins. Now there are 20 coins, but still only 10 sweets.
What happens to the price?
Slide to add coins. The shop keeps 10 sweets. Watch what one sweet costs.
More coins, same sweets: prices rise.
The sweets did not change. Each coin just buys less. That is inflation.
What if the shop makes 10 more sweets too? Then 20 coins buy 20 sweets, and prices stay put. Trouble starts when coins grow faster than sweets.
Your 100 coins sit in a jar and earn nothing. Prices rise 3 in every 100 each year, or 3%. After 24 years, the jar buys about half as many sweets.
A bank can pay you interest. That means a few extra coins, for leaving yours with the bank. Can interest stop the melting?
Set the interest and the price rise. Can you make your savings buy more sweets than before?
Savings melt only if interest is lower than the price rise.
Coins in a jar are your saved work, like the battery in chapter 1. With no interest, they melt like an ice cube. Enough interest can stop the melt.
You lend Ali 10 coins, with no interest. Prices rise. Ali pays back the same 10 coins, but they buy fewer sweets.
Who got the better deal?
To track prices, the UK keeps a pretend shopping basket. Each month, government price checkers collect about 180,000 prices for about 700 things, like food, clothes and transport.
The basket is updated every year to match what people buy. In 2025, a VR headset joined it.
Source: Bank of England: Inflation · ONS: the 2025 basket of goods and services
Real life is messier. A fuel shortage can push prices up. Prices can fall too. Still, many experts think too much new money pushes them up.
When prices fall, some people wait to buy. They hope it will cost less later. If everybody waits, shops struggle.
Here's a puzzle. New coins don't land in every pocket at the same time. Somebody gets them first.
Who wins and who loses? Find out in chapter 6.
🧠 What you learned
- More coins, same sweets: prices rise
- Cash in a jar melts slowly
- Interest can slow the melt, or stop it
🎯 Question 1 of 13 · Easy
The shop has 10 sweets. The number of coins doubles. What happens to the price of a sweet?
What is inflation?
In the sweets game, why did one sweet cost more?
What is the pretend shopping basket for?
The shop makes 10 more sweets at the same time as the coins double. What happens to prices?
Your jar earns nothing and prices rise 3 in every 100 each year. After 24 years, it buys about…
When you save in a bank, what is interest?
A bank pays you 5 extra coins in every 100 each year. Prices rise 3 in every 100. What happens to what your savings can buy?
Prices rise 4 in every 100 each year, and the bank pays 1 in every 100. What happens to your savings?
You lend Ali 10 coins with no interest. Prices rise, and Ali pays back 10 coins. Who gains?
Which of these is true?
Why is real life messier than the sweets game?
If prices are falling, why might some people wait to buy things?
Well done!
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Education, not financial advice. Never put in money you can't afford to lose.
👩🏫 Grown-up corner · 1 of 8
The sweets model, and where it stops
Economists call this the quantity theory of money: if money grows faster than the goods it chases, prices tend to rise. Changes in inflation are widely linked to the money supply. But the theory holds only under assumptions, such as how fast money is spent staying steady. Supply shocks, like energy crises, move prices too. So the game shows the direction of the effect, not its exact size.
👩🏫 Grown-up corner · 2 of 8
A real test: money made after 2009
In total, the Bank of England bought £895 billion of bonds with money it created (QE), starting in March 2009. From 2009 to 2019, UK prices rose about 2.2% a year on average, close to the 2% target. So new money does not always mean fast-rising prices: the sweets game leaves out how and when money is spent. The US, the euro area and Japan used QE too.
👩🏫 Grown-up corner · 3 of 8
How slowly does cash melt?
The jar model is 100 ÷ (1 + R)^Y, where R is the yearly price rise and Y the years. At 3% it gives about 49 after 24 years. A handy rule: divide 72 by the yearly rise to get the years it takes to halve (72 ÷ 3 = 24). At 5% interest against 3% price rises, you gain about 2% a year in buying power. At 1% against 4%, you lose. Real prices are close to this: the UK's price index went from 49.6 in 1988 to 138.4 in 2025, about 2.8 times, or roughly 2.8% a year.
👩🏫 Grown-up corner · 4 of 8
Why aim for a small, steady rise?
The Bank of England says that if inflation is too high or jumps around, it is hard for firms to set prices and for people to plan. If it is too low, or negative, some people may put off spending, because they expect prices to fall, and if everybody did, companies could fail and people might lose their jobs. In the UK, the Government sets the 2% target.
👩🏫 Grown-up corner · 5 of 8
Why 2%, not 0%?
The Bank of England's page does not say why 2% rather than 0%. The European Central Bank, which also aims for 2%, explains its own choice: 2% gives a safety margin against falling prices. Interest rates can only be cut so far, so when prices are already falling a central bank may not be able to give the economy enough help. It also lists two more reasons: pay that is hard to cut, which risks too much unemployment, and price figures that may read a little higher than the truth. The US Federal Reserve also aims for 2% over the longer run.
👩🏫 Grown-up corner · 6 of 8
The Saylor Series: inflation as a leak
The Saylor Series argues that inflation works like theft of other people's work, and its host says a central bank always gets new money first (we play that out in chapter 6). In the series, 2% inflation is compared to a mild drug, 10% to a poison and 20% to chemotherapy. Saylor says a steady rate is hard to notice, like heating a frog slowly, so people blame themselves. If money is stored effort, as chapter 1 said, a leak in money is a leak in effort. These are the series' views. Many economists would say the picture is more mixed, as the story's 'messier' step shows.
👩🏫 Grown-up corner · 7 of 8
Measuring the rise
Each month the UK collects about 180,000 prices for about 700 items, and the basket is updated every year to follow what households really buy. Saylor argues one basket number hides that every good inflates at its own rate, set by how easily more of it can be made: software and streaming barely, land and art hard. He also says the basket leaves out assets, though people get rich buying assets, not groceries.
👩🏫 Grown-up corner · 8 of 8
Governments owe money too
Governments borrow by selling bonds, which are IOUs for a fixed number of coins (chapter 4). A borrower who owes a fixed number of coins repays with coins that buy less, so rising prices help them, as they helped Ali. If pay and taxes rise with prices, a government's fixed debt gets easier to repay too. In the UK, the Government sets the 2% target and the Bank of England has the job of meeting it. Chapter 7 shows what can happen when a government pays its bills with newly printed money.