Inflation
"Inflation has been with us since 1954. It's likely
to be with us for the foreseeable future."
- Kay R. Shirley, author of
The Baby Boomer Financial Wake-Up Call
Many two-income couples have to rethink finances when they
start having children. Women must weigh the economic viability
of whether they can make enough money to pay for good childcare
once they return to the workforce.
The situation is similar to dealing with inflation--you need
to earn enough to compensate for basic living expenses, and
then some.
Inflation Erodes Your Future Purchasing Power
The Value of $1,000 Over Time…
|
Years
|
At 4% Inflation
|
At 5% Inflation
|
At 6% Inflation
|
|
5 years
|
$822
|
$784
|
$747
|
|
15 years
|
$549
|
$473
|
$407
|
|
25 years
|
$368
|
$287
|
$224
|
Let's say you stash $1,000 away in a safety deposit box for
the next 25 years, and inflation stays at today's rate of
4% throughout that time frame. When you take the money out,
you would only be able to buy $368 worth of goods.
Say instead you invested that $1,000 in a certificate of
deposit (CD) or fixed income bond yielding 3%. You're still
out of luck, as the money would lose 1% of purchasing power
because inflation was growing at 4%.
Assuming you can predict interest rates over time, to beat
inflation in this scenario you would need to earn at least
5% each year just to stay ahead.
|
Inflation
