Have you ever heard from your parents that they use to get pocket money not in rupees but in PAISE? Having even a ₹1 in pocket during those times was a cool thing.
Well because of the fact that during that time you could purchase a lot more things than you might imagine now for just ₹1.
I want you to ask your parents how much do they used to get pocket money on a regular basis when they were teenagers? What were the prices of movie tickets at that time? What was their family income as well as expenses during that time?
You might get surprised by the answers.
And you must be curious what happened that the purchasing power of money has become so less these days as compared to 30 years before? You might have your answers too.
It happened because of INFLATION!
The power of money to purchase something has gone down and it will continue to further go down in the future. So yes, it's a direct attack on your hard-earned money, allow me to explain how.
Your parents could have bought a lot of things from a ₹1 coin when they were of your age but what could possibly you can buy right now with the same amount of money? Probably nothing! So we can say that the value of money has decreased.
Even you have faced the effect of inflation (maybe unknowingly).
Remember how much pocket money you used to get when you were in primary school? Whatever would be the amount, is it sufficient today to purchase the same quantity & quality of the things you used to purchase then? Obviously NO!
So yes it's a real thing, which is eating up the value of your money.
₹5 could have brought you a world when you were 10, but it doesn't have the same value anymore.
The wiser question to ask here is that is it a good thing for us?
Let's try to understand it.
Let's suppose for quite some time, you wanted to buy a piece of cloth which is available to you at ₹1000 today.
Today you have got ₹1000 in your pocket.
Now you have two things to choose from. Either you spend this money & buy that piece of cloth or you save this money to use it later.
Let's say you decided to save this money for the future.
Now let me ask you a question, do you think that the same fabric which is available at ₹1000 today will also be available after 1 year at the same price?
Probably NO. It would cost a little more than ₹1000 a year later. So a year later ₹1000 you have can not provide you the same value.
The same thing would happen to almost every commodity, their prices will increase with time.
Back to our question, is it a good thing to happen? Well if you save your money by keeping it to yourself only, then yes it's a terrible thing for you. You kept ₹1000 with yourself & a year later this amount will not hold the same value.
That's what happens to your money, its value decreases by time. You might be thinking that you are saving money for the future but the fact is that the value of your money is constantly decreasing. Inflation is eroding your hard-earned money and there is nothing you can do to stop this inflation thing.
But yes, there's always a way out. Here you cannot control inflation but you can be smart with your money for sure. All you need to do is put your money is something where it can grow, faster than the rate of inflation. Inflation will remain for our lifetime but we can play more wisely.
This is the primary reason that one should always invest money, keeping it to oneself is equal to losing it!
We haven't discussed the inflation rate here because that would have become more complex. But yes my purpose was to make you understand the concept rather than technicalities.
We shall discuss it in my upcoming article.
Let me know in the comments section if you want me to put another article with more details and all.
Till then, see ya!
And don't forget to ask the above-mentioned questions to your parents.
(We recommend you don't blindly invest in anything. Investing is important but only according to your profile & suitability. Do consult with an adviser before making any money decisions)
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