How finance folk use it
Inflation refers to the rising prices of basic things we spend on. These include:
- Food and beverages
- Housing, utilities, fuels
- Health, education, clothing
Inflation affects the cost of living, which means the value of your money goes down as inflation happens. With inflation, it takes more money to afford the same things.
Is it good or bad?
It depends. While inflation makes the cost of living more expensive, it could happen because of the growth of economic growth. Inflation could also be the result of poor governance or global events such as the rise of oil prices, which in turn, affects countries dependent on oil for almost everything like transportation and energy production. Inflation is a fact of life and we need to be ready for it.
What it means for you
Because of inflation, the cost of investing today will cost more in the future. It’s like trying to hit a moving target. While saving is good today, you’ll need to do more. This is why people invest. If inflation is a byproduct of the economy growing, then investing is putting your stake in the economy so you can benefit from the growth.