From the course: Start Young for Your Best Retirement
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Two types of inflation
From the course: Start Young for Your Best Retirement
Two types of inflation
- 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…
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