You often hear about inflation on TV or read about it in newspapers these days.. However, chances are you don’t really understand what it is all about. Even if you did study economics in college, you would have already forgotten about it. Who cares! You are just too happy to finally have gotten over the course. After all, economics has been constantly voted as one of the most boring subjects ever created. But, what is it really? Why should you care about inflation?
Inflation is a very important economic concept. It should be one of your concerns. Why should you care? The answer is simple, because it affects you. It affects your wallet. It affects your finances. And ultimately, it affects your life.
What is Inflation?
In economics, when you talk about inflation, you talk about the relationship of the prices of goods and services with the purchasing power of your money. Inflation happens when there is a persistent increase in the prices of goods and services, which will ultimately lead to the fall of the purchasing power of your money.
The inflation rate pertains to the percentage increase of the general prices of goods and services. It also means the rate in which the purchasing power of your money is decreasing. In other words, if a chewing gum costs $1 (one dollar) 10; a 7.4% inflation rate means the $ 1 chewing gum will now cost $ 1.074 It also explains why your favorite food in a restaurant is either increasing in price or shrinking in size.
Inflation is a global phenomenon. No country is exempted from inflation. This means that everyone on the planet is affected by inflation, no matter where you are.
So, the next time you see the news reporting the inflation rate, listen and take a good look.
Although we cannot control inflation, there is a way on how we can cope with it. All you need to do is invest your money in investments that give a higher yield than the inflation rate.