Here's the technical definition:
Inflation - a general increase in prices and fall in the purchasing value of money
Sound complicated? Technically it is and know one knows exactly why it happens.
Here's what you need to know:
- The United States government tries to control it and keep it a steady 2% increase per year.
So, if you aren't gaining interest to at least keep up with the rate of inflation... you're playing a losing game.
To break it down I'll give you an example:
Let's say you put a $100 Bill under your mattress for one year. Now, inflation is happening all the time so let's say we know the rate of inflation is 2% because the government controls it.
Since your $100 Bill is under your mattress, it doesn't gain any interest.
So, after that one year that $100 Bill is now really only $98 Dollars.
I hope you understand inflation and realize how important it is to have all your money gaining interest.
If you're new and want to learn how to begin investing to try to beat inflation see the articles below.
- Simple Way to Invest in the Stock Market.... and the Environment Without Even Noticing
- The Top 3 Paying Saving Accounts
- The Key to Being Successful Is Compounding Interest