I get that the value of money depreciates over time hence why they tell you that the best time to invest is now. But i don’t get how exactly investing now helps you in the future if the cost of living increases with time too anyway. So like let’s say you invested $1000 today and then in the future that’s equivalent to $4250, but then the price of things have also increased so how much richer are you really if you have to spend a lot more in the future anyway?
In: 64
You have to compare the % returns on your investment to the inflation rate. Long-term (>10 years), inflation will really eat into the value of your savings, so if you don’t need the money right now, it’s better to keep it invested somewhere where you can safely expect the average returns to outpace the average inflation.
However, investments that give such high returns can be risky, and might lose you money in the short term. So if you need the money soon (~0-2 years) it can be better to keep the money in lower-yielding, more-stable investments or savings accounts. Sure, inflation might overpower your investment a little bit in those few years, but it’s better than losing a large chunk of it right when you need it, and it’s better than cash under your mattress.
Latest Answers