Updated: Feb 27
Let's take a closer look at inflation and how it works.
When we compare the costs of some of the things we use on a regular basis to their prices 11 years ago, we can see a significant change. This is the result of inflation.
It kills the value of money in our hands or in our bank accounts invisibly. Always, inflation has had a negative compounding effect on our wallets.
How does Inflation work?
When the cost of goods and services rises, this is referred to as inflation. This occurs as money's purchasing power or value diminishes over time.
As you may be aware, you cannot buy the same quantity of things with the same amount of money over time!
Reasons Behind Inflation
Infusion of Money by the Central Bank of any nation
Increase in per capita income
Increase in raw material prices
Reduction on taxes
Inadequate agricultural and industrial growth
Who decides the rate of Inflation?
Inflation is measured as a percentage increase in the cost of a basket of essential goods and services.
The rate of inflation is set by no one. Every month, the Central Bank of any country announces the rate of inflation based on calculations.
Ways to deal with Inflation
Now that you're aware that your money is depreciating over time, we need to take action to avoid inflation pinching our wallets.
Investing your money is the best method to beat inflation. You should investigate other investments that provide a larger return than the current rate of inflation.