Inflation _ The silent killer

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.

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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