Sabtu, 31 Mei 2014

Why Inflation Is Eroding Your Savings




The basic principle behind inflation is that as the money supply increases, so too does the relative price of goods and services. A common sentiment for children to hold is “why can’t we all be millionaires, then there would be no poor people”, or something to that effect. The answer is inflation. In theory we could all be millionaires, but this would drive up the price of consumer goods to reflect the increase in money supply, essentially balancing out society’s new found wealth.
The above scenario is an example of hyper-inflation, where prices rise in an exceedingly rapid fashion. In reality, most modern countries with stable, or fairly stable, economies have an inflation rate in the low single digits. When using New Zealand as an example, we have recorded an inflation rate of a little below three percent since the turn of the century, never veering too far from that mark in any one year. For the average citizen what this means is that as the amount of New Zealand currency increases by three percent annually, the price of goods and services follow in order to keep pace. In essence, you would have to be earning three percent or more in additional income each year in order to avoid a decrease in your buying power.
Modern investors need to more carefully consider their options when structuring a portfolio. Of course the key advantage of a bank is that you don’t risk losing your investment, but if your value is being eroded from year to year then you have to ask yourself what the point is. The best thing to do is speak to an Investment Adviser, who can help sort through your options and minimise the impact of inflation upon your savings.

Sumber : http://www.artikelberbahasainggris.com/ekonomi/why-inflation-is-eroding-your-savings.html

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