What is Inflation--and how does it effect a person's savings?

Question

What is Inflation--and how does it effect a person's savings?

Answer 1

If inflation is at 10% someone has been robbed of that 10%. If you have $50,000 in savings it means its only worth $45,000. Inflation is a tax, simple as that.

Ron Paul explains it pretty good. You should look at some youtube videos of him talking with Bernake (Federal Reserve President).

Answer 2

inflation is how much money devalues over a certain amount of time.  It effects a person's savings because it makes money worth less.  But also a rate of return may be higher (or it may not) and that is what effects savings.  so it depends on the situation.  A little inflation is better than the alternative of deflation

Answer 3

Gas and food are not figured in inflation.

Answer 4

Inflation is a rise in the general level of prices of goods and services over time. Several things can cause it, but Depreciation(the opposite) is much worse. Recently, Central banks in countries such as Canada and the US have made Inflation targets between 1-3% yearly. They change these targets by several means, but the most common mean is through interest rates.

Inflation will also make a persons savings worth much less, but because of these inflation control targets it is usually a very small loss. Hyper-Inflation(very high inflation rates) will destroy assets very quickly. (Imagine the price of a good going up over 10x overnight)