GLOSSARY TERM
Inflation
Inflation means that prices rise over time. When inflation goes up, the same amount of money buys less than before.
What does this mean in practice?
If your money stays in cash and earns little or no return, inflation slowly reduces its purchasing power. This means your savings may look unchanged in numbers, but in real life they may buy less in the future.
Example
If everyday expenses cost €100 today and inflation is 3% per year, the same things may cost about €103 next year. If your money did not grow during that time, its real value has gone down.
Why it matters
Long-term investing is not only about making money grow. It is also about protecting what your money can actually buy in the future. To build real wealth over time, your returns should ideally grow faster than inflation.
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