Investing term

What is Inflation?

The gradual loss of purchasing power over time. $100 buys less each year.

Inflation is the gradual rise in prices that erodes what your money can buy. At a typical 2–4% a year it feels invisible, but it compounds — over a few decades it can cut the purchasing power of idle cash in half. Inflation is the quiet reason investing isn't optional: money left in a low-interest account slowly loses real value every year.

For example

At 3% inflation, $100 today buys only about $74 worth of goods in ten years — cash that just sits there is quietly getting poorer.

Inflation is taught hands-on in Stage 1 — Money, Goals & Your Financial Foundation.

See the lesson →

Related terms

APRAnnual Percentage Rate. The yearly interest cost of a loan, including most fees.CompoundingWhen your returns earn returns of their own, so money grows faster the longer it's invested.Emergency fundCash reserved for unexpected expenses, usually 3–6 months of your usual spending.Employer matchFree money from an employer that matches part of what you contribute to a workplace retirement plan.
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