Everyone knows that inflation eats into savings and increases costs, but do you know by how much?

Inflation is a rise in general levels of price of everyday goods, over a period of time. Take a look at the table below – It shows the rate of inflation during a 10 year period.If your household expenses were Rs 20,000 in 2003, you have to spend double the amount in 2013 to meet the same expenses.

Year Inflation Expense
 2003        20,000
2004 3.78%        20,756
2005 5.57%        21,912
2006 6.53%        23,343
2007 5.51%        24,629
2008 9.70%        27,018
2009 14.97%        31,063
2010 9.47%        34,004
2011 6.49%        36,211
2012 11.17%        40,256
2013 9.13%        43,932

Another way to look at it is – If you had Rs 43,932 in 2003, it will only be worth about Rs 20,000 now.

Due to inflation, a steady income alone is not enough to help you reach your financial goals. For example, the current cost of a college admission may be Rs. two lakhs.

But after 5 years, the cost would typically be higher. While saving for a goal, therefore, it is important to estimate the future value of the goal because that is the amount that has to be accumulated.

That’s why you need to invest your money in various assets so that your return is above inflation rate and your money grows to meet your increased needs. Talk to Us to see how we can help grow your money better.


Have a Question about Money or Investing ? Ask Us >>

Tagged with →