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Inflation is a phenomenon where the general level of prices for goods and services in an economy increases over time, leading to a decrease in the purchasing power of money. This means that over time, the same amount of money will buy fewer goods and services than before.
For example, if the price of a loaf of bread is $2 today and it increases to $2.50 next year due to inflation, then the purchasing power of $2 will decrease and you will need $2.50 to buy the same loaf of bread next year.
Deflation, on the other hand, is the opposite of inflation, where the general level of prices in an economy decreases over time, leading to an increase in the purchasing power of money. This means that over time, the same amount of money will buy more goods and services than before.
For example, if the price of a gallon of gasoline is $3 today and it decreases to $2.50 next year due to deflation, then the purchasing power of $3 will increase and you will only need $2.50 to buy the same amount of gasoline next year.
The effects of inflation are often not directly felt but are played out over a long time, especially long-term investments are vulnerable to inflation.
At Horizon65, we created a mobile app that enabled you to check the effect of inflation on your savings.
Download our app and start gaining insight into your current and future finances.
