Welcome to Get Smart about Investing. One of the biggest financial challenges we all face is that things are getting more expensive each year. The cost of medical care is going up, real estate taxes, cars, and certainly the cost of raising children. That’s called inflation. Inflation is the gradual increase in the cost of living each year. A dollar today doesn’t go as far as it did last year. In the 1960s, the price of a ticket to the movies cost 75 cents and now costs over $10. The cost of a gallon of gas was approximately 20 cents and now it’s more than ten times that. That’s the impact of inflation.
Historically, inflation has averaged approximately 3 percent each year. What that means is if you put your money under your mattress or leave it in a bank checking or savings account earning 1 or 2 percent, you are actually loosing value each year and falling behind financially. Think about it. The cost of things are going up 3 percent and you are only earning 1 or 2 percent. That is the reason you have to invest. If you don’t, you cannot make financial progress.
I’m Greg McGraime and Now You Know!