What is Inflation?
Do you know about the sneaky bandit that steals money from billions of individuals every day? His name is inflation, and he's running your pockets as we speak.
Inflation is the reason why $5 footlongs at Subway no longer exist. Inflation is the reason why the retail price of the Bred 1 Jordan's your dad wore in the 90s went from being $125 to now being $180. Inflation is the reason why it costs you an arm and a leg to fill up your gas tank.
Inflation is a decrease in the purchasing power of money, reflected in a general increase in the prices of goods and services in an economy. Measuring the decline of purchasing power is possible by looking at the Consumer Price Index (CPI). The CPI examines the weighted average of prices of a basket of consumer goods and services, such as transportation, apparel, food, and medical care.
On average, inflation is eating away at the purchasing power of your money at a rate of about 2% per year. So while you think you're preserving your money by putting it in a savings account (that's earning you .01% interest), you're actually losing money.
“CPI Home.” U.S. Bureau of Labor Statistics, U.S. Bureau of Labor Statistics, www.bls.gov/cpi/.
Fernando, Jason. “Inflation.” Investopedia, Investopedia, 17 June 2021, www.investopedia.com/terms/i/inflation.asp.