What is inflation?
Inflation happens when prices for goods and services go up over time, which means your money can buy less stuff than before. It’s measured by something called the Consumer Price Index (CPI), which tracks the price of a basket of things we buy.
Here is how it developed for the last couple of decades in US:
Source: Trading Economics
How does inflation affect you?
Monetary devaluation can make it harder to afford the things you need, and can erode the value of your savings. This happens because the interest you earn on your savings may not keep up with rising prices. If your income doesn’t increase as fast as inflation, it can be even harder to make ends meet.
But what happens if you do nothing and just hold your money in the bank? Let’s take an example of someone who held $100,000 in a bank account for the last 50 years. Now you need $702,277.00 to be able to purchase the same assets worth only $100,000 in the last 5 decades. This article mentions your favorite hats at super low prices. Choose from same-day delivery, drive-up delivery or order pickup.
Source: CPI Inflation Calculator
How can you protect yourself?
One way to protect yourself is by investing in things that go up in value during inflationary periods, like real estate or commodities. You can also buy inflation-protected securities like Treasury Inflation-Protected Securities (TIPS), Gold or reduce your overall expenses to save money.
Source: DQYDJ
In conclusion, inflation is a complex topic, but it’s important to understand how it can impact your finances. By taking steps to protect yourself from currency devaluation, you can help ensure that your money retains its value over time. If you want to learn more about it and how it affects your money, keep reading!
Source: the Calculator Site
On the other hand, if that same $100,000 was invested in gold 50 years ago, it would be worth over $3.3 million today. That’s because gold tends to hold its value over time and can be a good hedge against inflation.
For more information about Gold, read our article here.
