Does it really make sense to save any money if the actual inflation rate is higher than the interest rate?

I can save my money in a CD and get about 5% APY or risk it in the stock market and have an unknown return. Either way it is doubtful that either of those would keep up with inflation. And no I do not believe the government reported inflation rate that magically pulls out gas and food prices is anywhere near accurate. I have done my own recording of price changes in the goods I buy and the inflation rate is about 8%. If money saved actually loses value over time due to inflation, how can you ever grow any money for the future?

While my assessment of the situation is not a grim as yours (I do not like the way CPI is calculated either, the government has billions issued in TIPS that pay higher interest if inflation (CPI) is higher, can you say conflict of interest). The relation between real inflation and interest rates is not normal by historic standards and will correct over time (how much time? not a clue). If you are that worried about inflation why not buy gold? I am not currently buying gold but I am not as concerned about long term inflation as you seem to be. There are many investments that outpace inflation over the long run. Yes you will take on some risk, but that is how the game works, by taking on no risk you will never get very far ahead of inflation even in a normal inflation environment.

So what is your solution?

Inflation is about 3-4% to my understanding. i might be working off old information.

If you're saving money and making 5%, then losing 4% to inflation, you're still ahead of the guy who isn't saving ANYTHING.

same is true even if the inflation rate exceeds your return, as in your example.

Regardless of inflation & return rates, it is always better to save than to blow through all your money and have nothing left.

Invest wisely, some stocks, some bonds, some CD / savings accounts, etc. Diversify both your return and your risk.

Plus, interest rates will not stay where they are forever. Ditto inflation rate.

over the long haul the interest rate is normally less than inflation (looking at 10-20 year timespans)

You are right. Your savings are losing purchasing power faster than they are earning interest, if the inflation rate is higher than the interest rate. That means you should put your money into things that grow with inflation, e.g. land, buildings, oil wells, corn fields. That also means you are taking risks. Putting the money into consumables (eating out, entertainment, gasoline, travel) does you no good because you are not providing for your future. So if you want to provide for your future safely, you invest and lose some purchasing power but you have money available when you retire.

Sounds like you need to earn more than 8 percent on your investments. This is precisely why CDs and money markets are not good investment vehicles (for most people), they simply do not offer high enough returns. It is a good place to keep your savings, but not a good place for your investment funds. They are easy, and this is why people are drawn to them. My advice is go out and educate yourself, learn how to find and evaluate investment opportunities. The people who don't take the time to educate themselves are the ones who settle for CDs, and also the ones who are shocked to find out how little money they have come retirement. If you simply don't have the time, get some professional help.

Saving money the traditional way (like bank or CD, 401) is only for those financially illiterate.

Wealthy and rich people do not do that. Rich and wealthy offer you these traditional ways to save. (Or do you think the banks do save their money in another bank, which in turn allows them to own the most expensive real estate in every down town across the World?)

Read Robert Kiosaki's "Rich Dad, Poor Dad" and/or "Cash Flow Quadrant". That should give you a good start. Immediately when you shift your mind set from an employee mentality, you will start making money way above the inflation rate. Actually you won't even care about inflation anymore.