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Personal Finance for Teens

Beware of Modern-Day Theft

By this time, you must have a basic idea about the concept of inflation. It is the decrease in purchasing power on account of a sustained price rise for a basket of goods and services. 

 

In the words of Sam Ewing, “Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair” 

 

My parents are lovely people but they do not leave behind any opportunity to say things like:

 

We used to be happy with just five rupees and look at yourselves, not satisfied with even a thousand

 

This thing cost pennies (aanas) back in our time. Is it even worth the price you are paying?” 

 

Well, at least you know what to do the next time you encounter a similar situation. 

 

Getting back to our topic of discussion, savings cannot be kept in the form of idle cash at home. Cash in itself is a depreciating asset. It loses its value over time. The purchasing power of the same ₹2,000 banknotes will not be the same after five years as the price of corresponding goods & services would increase by a sizable amount.

 

To put things in perspective:

A very popular saying in the world of finance goes like:

 

There are no free lunches

 

Every time the government prints more money it is indirectly stealing from the pockets of the common man. How so you may ask.

 

It is assumed that the printed money is spent on goods and services for the benefit of the common man. Increasing the supply of money in the economy drives down the purchasing power of the currency. Think of it this way- more money is chasing the same bunch of goods & services. Hence, when the supply of corresponding goods & services cannot be increased by a similar proportion, the prices increase. You now have to shell out more money to buy the same amount of stuff. 

 

Hence, it is always advisable not to keep your savings in the form of idle cash but to invest that will help you grow your money exponentially.

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