61 votes

Why would I ever put my money into a savings account that returns less than the current inflation rate?

Why? Because the two are unrelated. "Inflation rate" is calculated by measuring changes in the consumer price index (CPI). Your personal consumption may not match the CPI and the inflation you ...
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  • 75k
40 votes

Why can more jobs mean more inflation and decreased stock prices? What are other links in the chain to watch out for?

Many news outlets ... are reporting that the current US stock sell-off is due to a stronger-than-expected jobs report in January... Had the market done well in the last few days those same people ...
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  • 45.7k
33 votes

What does inflation mean to me?

Inflation as defined in the general, has many impacts at a personal level. For example, you say that the reduction in the price of oil has no impact on you. That's absolutely not true, unless you're ...
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  • 35k
33 votes

What does an x% inflation rate actually mean?

Let's say there's a product worth $10 in July and the inflation rate in August is 10%. Will it then cost $11 in August? Yes. That's basically what inflation means. However. The "monthly" inflation ...
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  • 48.6k
32 votes

If stocks are products, and inflation makes the price of products go up, then why don't stocks benefit from inflation?

Stocks aren't products, they are assets. In either case their prices DO tend to go up with inflation just like any other asset. However, I wouldn't say they benefit from this any more than owning any ...
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  • 51.6k
27 votes

Why would I ever put my money into a savings account that returns less than the current inflation rate?

You keep money in a savings account so that you know you can access it at any point, and that it will always be there. It is diversification of risk. If you have the money in equities instead, you ...
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  • 5,077
27 votes
Accepted

What’s the difference between inflation and inflation tax?

It's mostly semantics. Per https://en.wikipedia.org/wiki/Talk%3AInflation_tax#:~:text=An%20inflation%20tax%20is%20the,that%20subtracts%20value%20from%20currency. An inflation tax is the economic ...
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  • 7,009
24 votes
Accepted

Should I max or min my affordability on a new home?

Your comment about quality of living is the answer to your own question. In general, it's best to live in as small a house as one can be comfortable. You offer no other real details beyond $1,000/...
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22 votes
Accepted

If stocks are products, and inflation makes the price of products go up, then why don't stocks benefit from inflation?

Stocks are not products, they are shares of companies. If the companies are expected to perform well, stock prices are high. If they are expected to perform bad, stock prices are low. If a company was ...
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  • 6,708
21 votes

What Was "A Lot of Money" In 1971?

First, from The Inflation Calculator - What cost $24,000 in 1971 would cost $141,898.11 in 2015. But. In 1970, mortgage rates were 8.5% vs 3.5% today. The payment on $24K (let me just do the math ...
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21 votes
Accepted

How much do I need to invest monthly to accumulate a given amount?

If you save x every month, the future value (FV) is where n is the number of months r is the monthly rate of return So if Y% return is 10% nominal interest compounded monthly r = 0.10/12 For ...
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  • 9,052
20 votes
Accepted

What Was "A Lot of Money" In 1971?

To answer your specific question about income, the answer is: about $20,000 (or a little less) in yearly income put you in the top 10% of income earners in the United States in 1970. This information ...
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  • 11.6k
17 votes

Why can more jobs mean more inflation and decreased stock prices? What are other links in the chain to watch out for?

First, I advise against attributing stock market movements to particular pieces of news. Many cable shows depend on your interest in this question, but unless the news is nuclear war, its long-term ...
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17 votes

What’s the difference between inflation and inflation tax?

It IS going to the government. What causes inflation is when the government increase the money supply faster than the economy is growing. Imagine a simpler monetary system with no fractional reserve ...
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  • 20.8k
16 votes
Accepted

Inflation and the current value of my dollar

Your $100 at t=0 will be worth $55.2 thirty years hence. Something that costs $100 today will cost 100*(1.02)^30 = $181 30 years later. So your original $100 can purchase only 100/181 worth of goods ...
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  • 1,034
15 votes
Accepted

What is inflation?

Inflation is basically this: Over time, prices go up! I will now address the 3 points you have listed. Suppose over a period of 10 years, prices have doubled. Now suppose 10 years ago I earned $...
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  • 253
15 votes

Should I max or min my affordability on a new home?

Other things to consider: Bigger house generally leads to higher costs besides the purchase price. Utilities will be higher, general repairs will be higher, Taxes (I assume you figured them in, but ...
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  • 2,748
14 votes

What does an x% inflation rate actually mean?

As pointe out by @quid, inflation figures are almost always quoted as a comparison of prices last month, and prices a year ago last month. So 10% inflation in August means that things cost 10% more ...
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  • 4,254
13 votes
Accepted

True cost of a mortgage when considering inflation

The rates can't just be subtracted. You have to discount each future payment for inflation to find the total inflation-adjusted cost. First though, the calculator you are using is assuming the input ...
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  • 9,052
12 votes
Accepted

What does inflation actually mean?

Inflation is good for the economy primarily because it is an incentive to invest. If inflation is occurring, then keeping your holdings in cash is a net loser; 5% inflation means that in a year, your ...
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  • 35k
10 votes

What does an x% inflation rate actually mean?

Individual product prices do not necessarily rise at inflation rates. What inflation means is that the purchasing power of one unit of currency decreases by x% in a year, which is typically measured ...
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  • 115k
10 votes
Accepted

Salaries updated for inflation

Inflation is a macro pressure. It is not experienced at a micro level on a 1 to 1 basis. In a given year a pay raise less than the stated CPI rate, for some people the change will either be a real ...
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  • 48.6k
10 votes

Why would I ever put my money into a savings account that returns less than the current inflation rate?

Any store of value has some risk of being outpaced by inflation, as measured by some other asset. For instance, you might invest in property, but find that the cost of a loaf of bread has gone up ...
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  • 952
9 votes

Should I stockpile nickels?

Nine years later, we know that pursuing this strategy is a losing proposition. Using the Base Metal Coin Melt Value Calculation at coinflation.com as you suggested, we see that $10.00 of nickels is ...
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  • 49k
9 votes

What is the future of 401(k) in terms of stability and reliability?

The same author wrote in that article “they have a trillion? Really?” But that’s what happens when ten million dollars compounds at 2% over 200 years. Really? 2% compounded over 200 years ...
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9 votes

What is the future of 401(k) in terms of stability and reliability?

My guess is that the point is that yields on bonds and cash equivalents is so low that inflation will cause the inflation-adjusted returns to be negative. There is something to be said for how much ...
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  • 10.1k
9 votes
Accepted

How much value will money lose if left in a checking account?

The average inflation rate in the US over the last 17 years is 2.17% per year (source). So he has $30,000 now. If another 3 years go by and he doesn't invest it in anything whatsoever, he would have ...
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  • 3,387
9 votes

Why would I ever put my money into a savings account that returns less than the current inflation rate?

Saving in a bank account that pays less than the rate of inflation isn't a risk. If inflation is 2%, and you get interest of 1%, then you will lose 1% of value per year. That isn't a risk - you know ...
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  • 8,966
8 votes

Inflation & Time value of money

Suppose you have $100 today and suppose that hamburgers cost $5. If you are holding $100, you could buy 20 hamburgers at $5 each. Now suppose you take that $100 and stuff it under your mattress for ...
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  • 17.2k

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