Monday Morning Money Moment: March 13, 2017
Inflation and your Money
You are losing money!!! Listen close because I will tell you why this little thing called inflation is killing your money. We all have an idea of what it is but do we know what it does to us and our money?
Here’s a simple example of inflation: You go to Tim Hortons and find that they raised the prices 5 cents. You then go to the grocery store and see that your Mr. Noodles is more expensive too. (Please stop eating Mr. Noodles by the way) Oh damn, my rent just went up too. The simple premise is that every year your dollar is worth a little less than it was last year. We all know that. It’s pretty well known. Now what?
Hopefully, your employer gives you regular raises. This will combat the loss of your purchasing power. Oh good, I got my raise so now I can keep buying Tim Hortons. Well, what about my savings? Yes, that money you have in your bank account is depleting every day, little by little. But my bank offers me a “High-Interest Savings Account!” Yeah, my bank offered me one too. That account had a rate of interest of 0.55%. That was the “high” interest account. The average rate of inflation is about 2%. Ah yes, you still lose money. Just to let you know banks use your money to add to their bottom line. You’d figure they could at least allow your money to grow with inflation. Sorry, not sorry.
This is why you MUST have your money working for you. There are many ways to keep up with inflation. In the low-interest environment, we are currently living in, you must find a way to achieve at least a 2% rate of return. If you do not your money will evaporate slowly. $10,000 just sitting around will be worth only $8,203.48 ten years from now. That is at 2% inflation. Some years it is even more than that.
Tomorrow I am going to show a solution to this nasty thing called inflation. The “Tuesday Tip of the Week” will show you an easy way to get your money working for you. Keep fighting the good fight friends.
“Inflation is taxation without legislation.” – Milton Friedman
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Joseph James Francis is a Financial Advisor. You can find him on various social media platforms and at www.budgetboss.ca.