If my dad put 5 grand into the bank in 1960, how much would it be worth now?

In 1960 you could by a house with 5 grand, but today, you would need 200 grand. So how much would the account be worth, 5 grand or 200 grand?

My point is that, seeing as the value of things goes up, having 5 grand in 1960 was a lot of money but it will always stay 5 grand (ignoring interest for a minute), so are you are effectively losing money while it is in the bank?

I know I may not be wording this right, but if you understand what I am trying to get at, please reply.

He would need to earn interest of around 8.5% per year and compound that interest for 45 years in order to turn his 5 grand into roughly 200 grand.

Compound Interest Calculator

hmmmm.... so he would actually lose money if he put it into a bank account (one with less than 8.5% interest)?

No, he clearly wouldn't lose money. You would only lose money if, for example, you put £5000 under your bed in 1960, as today, due to inflation, it would be worth much less than £5000 (this is excluding decimalisation!).

Your comparison was putting money in a bank account compared to buying a house. I said he would need to have a bank account with at least 8.5% interest in order to turn £5000 in 1960 into £200000 today.

In fact, your comments about house prices were a bit out. In Q1 1960 the average house price was £2189, compared to an average price of £154107 in Q1 2005. Source: UK House Prices since 1952

You'd in fact need a compound interest rate of 10% in order to turn £2,189 in 1960 into just under £160,000 today.