MONEY
Inflation is an inevitable part of the economy, and its impact on our purchasing power is often underestimated. Inflation is typically around 6% annually. This means that the cost of goods and services increases by about 6% annually. But what does this really mean for you and your savings? Adhil Shetty, CEO of Bankbazaar.com says, “In simple terms, inflation is the rate at which prices of goods and services increase over time. It erodes the purchasing power of your money , meaning that what you can buy today with a certain amount of money will cost more in the future. For example, think about the price of your groceries or petrol five years ago and compare it with today’s prices – they’ve increased, right? That’s inflation in action.” Let’s say you’re eyeing a property, a luxury car , or a high-end investment that costs Rs 50 lakh today. If inflation holds steady at 6%, you’ll need almost Rs 90 lakh to purchase the same item in a decade. Here’s why: inflation compounds over time, causing prices to increase year after year. So, something worth Rs 50 lakh today will not just cost an additional 6% after ten years; rather, it will be worth about Rs 90 lakh due to compounded inflation. Also Read: PIB Fact Check: Did FM Sitharaman really advise investing in Crypto to become rich? Here’s a breakdown: After ten years, Rs 50 lakh will become Rs 89.54 lakh – nearly double the original cost! Let’s say you’ve been dreaming of buying a house worth Rs 50 lakh in India . But, if inflation continues to rise at an average of 6% per annum, then ten years from now, that same house could cost you nearly Rs 90 lakh. If you’re delaying your purchase, you may need to save more than Rs 50 lakh to keep up with future prices. Let’s say if you’re saving Rs 5 lakh a year with the hope of buying this property, then in ten years, you would have saved Rs 50 lakh. But by then, the property’s cost would have almost doubled. This means your purchasing power would have eroded over time due to inflation, making it harder for you to buy that property in the future.(Please note that we have factored in only the impact of inflation on the property price, while other factors, like the impact of a hike in circle rates, have not been considered). Inflation impacts everything including education costs. Today, a four-year degree at a top university in India might cost around Rs 20 lakh. With 6% inflation, in 10 years, this cost could increase to Rs 36 lakh. If you have a child planning to attend college in the next decade, you’d need to save significantly more to cover their tuition fees than you would today. 1. Invest in Equities: 2. Consider Real Estate 3. Look at Inflation-Linked Bonds 4. Build a Diverse Portfolio Inflation has a cumulative effect on all goods and services in the economy . The best way to stay ahead is to plan early, invest wisely, and understand the power of compound interest, both as a benefit for investments and a concern for inflation. Understanding inflation’s impact on long-term goals is crucial, whether it’s for a future home, a dream car, or your child’s education.
| Inflation Calculation on Rs 50 Lakh | |
| Year | Effective Price (₹) |
| 0 | 50,00,000 |
| 1 | 53,00,000 |
| 2 | 56,18,000 |
| 3 | 59,55,080 |
| 4 | 63,12,385 |
| 5 | 66,91,128 |
| 6 | 70,92,596 |
| 7 | 75,18,151 |
| 8 | 79,69,240 |
| 9 | 84,47,394 |
| 10 | 89,54,238 |
What’s New
Spotlight
Advertisement
Featured News
Latest From This Week
Popular News
