How Do You Beat Inflation?
When it comes to building wealth, time is much more powerful than the amount you invest or even the returns you earn. But it also matters where you put your money.
Valeria has her money set aside in a savings account at her bank that pays a 0.06 percent interest rate.
this calculator to see how much inflation has affected the value of the dollar over the past 100 years.
Investing Fights Inflation
Because of inflation, the same items you purchase today will cost more in the future.
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Even though Valeria is putting away money on a regular basis, is she beating inflation by keeping her money in her bank’s low-interest savings account?
The rate of inflation is constantly changing — over the past 10 years, the inflation rate fluctuated from as low as 0.1 percent to as high as 4.1 percent, but has averaged higher than 1 percent. So, while Valeria can take advantage of interest compounding as she makes a plan for her new investing strategy, her money is not growing at a fast enough rate in her savings account to beat inflation. In other words, her money is losing purchasing power.