Inflation
Rising prices that reduce your money's value.
What does it mean? (Simple)
Inflation is the rate at which prices of goods and services increase over time. In India, inflation typically runs around 5-7% per year.
If inflation is 6% and your savings account gives 3.5%, you're actually losing purchasing power. This is why it's important to invest, not just save.
When planning investments, always think about "real returns" (returns minus inflation).
Example with ₹ numbers
A thali that costs ₹100 today might cost ₹134 after 5 years at 6% inflation. Your ₹100 note stays ₹100, but buys less food.
Common mistakes to avoid
- ⚠️Ignoring inflation when planning for long-term goals
- ⚠️Keeping all money in low-interest savings accounts
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⚠️ Educational only: This explanation is for learning purposes. Please consult a financial advisor for personalized advice.