What is Inflation?
Inflation refers to the general increase in prices of goods and services over time, which decreases the purchasing power of money. It is measured by indices such as the Consumer Price Index (CPI).
How Inflation Impacts Savings
- Decreases Purchasing Power: As prices rise, the value of money diminishes, making goods and services more expensive.
- Erodes Savings: Money kept in savings accounts without interest loses value over time due to inflation.
Protecting Wealth from Inflation
- Invest in Assets That Outpace Inflation: Stocks, real estate, and commodities typically provide returns that exceed inflation rates.
- Diversify Investments: A well-balanced portfolio mitigates inflation risks.
- Increase Earnings: Consider side businesses or upskilling to maintain financial growth.