Whether you’re figuring out how much you need to save for retirement or looking to take out a loan, you’ll want to remind yourself of this important financial concept: Inflation.
Inflation is the rise in cost in items over time, or, another way to view it, the decrease of purchasing power over time.
The average inflation rate in the US since 1913 has been 3.2% per year. For example, if a stick of gum costs $1.00 this year, it’s likely to cost around $1.03 next year. So you can buy 3% less with the same amount of money every year, on average. Make sure you take this into account when planning for your financial future!