Investing term

What is Purchasing power?

What your money can actually buy, adjusted for price changes.

Purchasing power is what your money can actually buy once you account for changing prices. It's the real measure of wealth — $100 is only worth what it buys, and inflation steadily eats into that. Investing exists largely to grow purchasing power faster than inflation erodes it; money that merely keeps its nominal value is quietly getting poorer.

For example

If prices rise 3% but your savings earn 1%, your purchasing power shrinks 2% that year — you can buy less despite having more dollars.

Purchasing power 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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