Learn how money value declines over time via inflation, which is why investing is important. Also, explore how to avoid lifestyle inflation, which causes spending spikes and reduces your ability to save for the future.
- Inflation is a term that a lot of people have heard,…but not a lot of people understand,…and it's an important issue to understand,…because it can seriously affect your ability…to save for the future.…Inflation refers to the rate at which prices…for goods and services in an economy rise.…Every time your grandfather starts a sentence with,…"In the old days," he's probably going to talk about inflation.…Yes, a movie used to cost a dollar,…and a cup of coffee was 15 cents.…That increase in prices is inflation.…Inflation can be a super destructive force,…especially if you're trying to save for retirement.…
The danger with inflation is that it eats away…at the purchasing power of your money.…If you have $100 in savings this year,…it'll buy you 100 packs of gum.…With three percent inflation, you'll only be able…to buy 97 packs of gum next year,…and over time, your savings will buy less and less gum.…In 1979 and 1980, US inflation ran over 12%.…It meant that in those two years,…your retirement savings would have lost…
- Recognize the strategy used to combat inflation while still working.
- Determine whether investing in a company or working for a company is more profitable.
- Summarize the concept of Dollar-Cost Averaging.
- Identify the simplest, easiest investment opportunity available for young workers just starting to invest for retirement.
- Explain what “diversifying” means by using an example.
- Determine whether incurring debt can have a financial advantage.