What Is Inflation?
The gradual rise in prices over time, which quietly shrinks how much each unit of your money can buy.
If prices rise about 3% a year, something that costs $100 today costs roughly $103 next year. Your money did not change — but what it can buy did. That is why cash left sitting slowly loses purchasing power.
Inflation is the main reason people invest rather than hoard cash. To simply keep pace, your money needs to grow at least as fast as prices rise; to get ahead, it needs to beat inflation after fees and taxes.
A $60 game today might be $70 in a few years for the same thing. If your savings are not growing, you can afford a little less each year without spending a cent more.
Key points
- Prices rise, so cash buys less over time.
- It is the hidden cost of leaving money idle.
- Beating inflation is a core reason to invest.
Learning the basics? Follow the whole path from saving to investing.