Definition
The gradual rise in prices over time, which can reduce your money’s purchasing power. It’s an important factor to consider when planning long-term savings.
What to consider
- Keep an eye on rising prices and how they affect your daily expenses.
- Invest in assets that can keep pace with inflation.
- Adjust your budget over time to maintain your purchasing power.
Real world scenarios
- Yearly inflation bumps up grocery prices, prompting Todd to shift more money into high-yield investments for purchasing-power protection.
- Gabrielle factors in inflation when projecting how far her retirement savings will stretch, adjusting contributions accordingly.
- Inflation leads Janelle to reconsider storing large sums in a standard savings account. She invests some to seek higher returns.
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