Just saving money isnt enough; you need to invest it wisely to ensure that inflation doesnt eat it away : (Valueresearch) According to the dictionary, income that is not spent is saving. If you don’t spend ten per cent of your monthly income and just keep the cash in a box, then you are saving money, no question about that. It’s a simple concept, but by itself, it doesnt get you very far. The basic reason for that is that money doesnt retain its value. Prices rise and what was worth a hundred rupees last year is probably worth ten or twenty rupees more this year. Inflation eats away at your savings, bit by bit. Historically, inflation in India has always been at a far higher level than in the developed countries. Over the last thirty years, it has varied over a wide range, but has rarely fallen below five or six per cent per year for a sustained period. The long-term average over this entire period is about eight per cent. Eight per cent doesnt sound all that harmful. It just means that something worth Rs 100 becomes Rs 108. However, that’s the annual rate. The inflation rate is a compounding rate, and the inflation of one year feeds into that of the next year, and so on. This means that if you had saved Rs 1 lakh in 1982 and just kept it in a drawer as cash all long, then it would be worth no more than Rs 8,200 today, just 1/12th of its original value!
Posted on: Sat, 08 Mar 2014 05:50:22 +0000
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