The impact of inflation is not understood appropriately by today’s youngsters. They should have the wisdom and foresight to take inputs from their parents and grandparents because they can teach today’s generation how inflation has eaten into the vitals of our society over the past many decades. If you ask your grandfather, he will have stories to tell which might look unbelievable and out of the world.
Inflation and the eroding value of the Dollar
Many of today’s youngsters might feel that grandfather is trying to pull a fast one, when he says that hamburgers used to cost 10 cents, when he was young. Though initially it might not be possible for you to believe what he says, when one does a small calculations, things will start falling in place. An average inflation rate of 5% will certainly erode the value of the dollar over a period of time. If one assumes an average inflation of 5% per year for a period of 10 years then it is likely that the value of the dollar would have eroded by 63%. In other words, if one dollar was equal to one dollar in 2004 it is only 0.37 cents today. Such is the power of inflation.
Planning for the future
In such situations, the only way to beat inflation is to find out ways and means to either generate income at a faster pace than the average growth of inflation. While in your active employment period, you may be able to do it to a certain extent, you need to pan beyond your active years. You need to look at life when you reach retirement. Once you reach retirement, your income will plummet to zero or to just a trickle.
Under such circumstances, it is important for you to find out investment avenues and methods which will yield you higher returns in order to nullify the effect of inflation. Though USA is much better placed than countries like Brazil as far as mean inflation levels are concerned, still, one has to find out the right retirement plans which can beat inflation convincingly. Today, there are quite a few such avenues available and the much talked about social security schemes are intended to ensure the same.
It is important however, for each of us to be informed, educated and knowledgeable failing which we might see our retirement lives being pushed into a quagmire of uncertainly and difficulty. You have to be a man or woman with wisdom and forethought to understand this at an early age.