How does inflation impact my savings?

In your lifetime you may have noticed an increase in the cost of everyday expenses, like bus fare for example. Typically, money loses value over time because the price of goods and services generally increases over time.

This rise in price is known as inflation. To put it simply, inflation means that a dollar won’t buy you as much in the future as it does in the present.

As a result of inflation, even when money earns interest, it still may not be able to buy the same amount of goods or services it did before. Put another way, it loses its purchasing power. If your savings account is paying one percent interest every year, but the inflation rate is two percent every year, your savings will be able to do less and less over time.

While savings are essential to financial planning and well-being, savings are not the ideal means for building wealth. Investments, while not generally as safe as savings, can offer a path to beat inflation and build your wealth.