The rise in prices of goods and services over time is referred to as ‘Inflation’. The same amount of money can purchase fewer goods than it could prior to inflation. For instance, inflation occurs when a chocolate bar costs 20 today and 25 the following year.
There are many reasons for inflation. The cost of producing things might occasionally rise due to factors like rising fuel or raw material prices. Prices increase at other times when consumers have more money to spend but there are less goods available. Governments and central banks try to control inflation by changing interest rates or money supply.
Inflation affects savings the most. Your money gradually loses value if it is simply kept in a low-interest bank account. Making your money increase more quickly than inflation is crucial for this reason. Investing is one way to do this. You may beat inflation with your savings by investing in stocks, mutual funds, or inflation-linked bonds. For instance, your real gain is 2% if your investment yields 8% but inflation is 6%.
To protect your money, it’s smart to invest in options that give returns higher than inflation
