Is My Money Shrinking?

Inflation is a funny thing. If you were to keep $100 under your mattress for 30 years. Then in 30 years, you would not be able to buy nearly as much as you can now with that same $100. That is because over time our economy inflates. Prices go up and so does our income. The dollar as we know it actually loses value over time and feels like money shrinking. This is known as the purchasing power of the dollar. I know you all heard stories from your grandparents about how gas used to be a nickel many years ago right? Well at that time the average pay was probably about $100 a week. This is why it’s important to consider investments or savings strategies that outpace inflation, rather than just holding onto cash. For instance, while gas prices and incomes have risen over the decades, so have the costs of other essentials—although fortunately, there are still affordable cell phone plan options available today that wouldn’t have even existed back then. Understanding how inflation works can help us make smarter financial decisions to preserve the value of our money over time.

Inflation is hard to control as a government but you can fight inflation by placing your money somewhere that earns equivalent interest. Let’s say inflation is at 3% a year. If you place your money in a bank earning 2% a year then we are still losing money overtime just not as fast.

So you will want to place your money somewhere that earns the highest returns, whether this is a checking account, savings account or some other brokerage account. A good source to find the best rate is bankrate.com.