Inflation _ The silent killer

financial_insider resp government grants

Inflation is the rise in prices of goods and services over time.

When prices increase, your purching power decreases. For example  if the inflation rate is 3.5%, your $100 today will only be worth $96.5 next year.

Inflation is a major factor to consider when you build upp your financial future. For instance, if you put your money in an account with a zero rate of return, its value will certainly decline in the long run.

In 2018, the average inflation rate in Canada was approximately 2.27% compare to previous year.

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What will your $100 do in the next 20 years? assuming the inflation rate is 3%:

Today's $100

Years from now       Purchasing power         Amount equal to

                                                                       $100 of today

5                                         $86                          $116

10                                       $74                          $134

15                                       $64                          $156

20                                       $55                          $181

Say you plan to retire with $4000 income per month in today's value. 20 years later, at a 3% inflation rate, you will need to have $7,224 per month to maintain the same purchasing power. Are you prepred for it?

Do you think that you should save more and spend less?

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