Inflation and Purchasing Power - You need to know why!

We need to know what the inflation rate is because it affects all of us. The inflation rate represents the increasing cost of living for example. Inflation rate reflect the loss of purchasing power we hold with our money. The higher the inflation the less our money (currency) can buy in the future.

The only way to ensure our money will grow is to invest our money in something that gives us a higher return than inflation. One guaranteed way to loose money is by storing it ourselves, because with time the less we can buy with that money, another way to loose money (but not as fast) is to keep our money in a bank. The bank will pay you interest lower than the current inflation rate but they can lend much more money because of the fractional reserve banking laws at much higher rates. We will cover that topic later. Thanks for checking out my finance matters blog!