You already know that, thanks to inflation, a dollar today doesn’t buy you as much as it used to. You also know what that means to your paycheque: If you don’t receive a raise now and then, your spending power actually decreases over time.
Inflation also munches away at the money you set aside for saving instead of spending. Set aside $1,000 today and, at 2% inflation, your $1,000 is expected to only buy about $820 worth of goods and services a decade from now. This can become especially harmful once you’re in retirement, with less earning power from your career.
So how do you “inflation-proof” your savings? That’s where the stock market comes in handy. Just as you seek periodic raises at work, you can also put your savings to work for you. The trick is to invest some of it in the stock market, where it is expected to handily outperform inflation over time.
Then again, beating inflation by investing in the stock market does not mean you have to beat the market itself … as so many investors try to do. Check out today’s “No Dumb Question” video to learn more about why you can – and should – take control over the impact of inflation on your carefully saved reserves.