Inflation is the rate of increase in prices of products and services. This is the reason why the value or purchasing power of money is decreasing. A 1,000 dollars ten years ago will buy more products or services back then compared to what it can buy today. This is why it’s not always a great idea to put all your extra money in a cash savings account. If your cash account is only gaining an interest rate of less than 1 percent per year and the inflation is more than that then your money is losing its value.
So if you don’t want to lose the value of your money, you need to beat inflation by putting your extra cash into assets that could potentially earn you a rate of return higher than the inflation rate. Examples of these are real estate, business or investment. I used the term “potentially earn” because putting your money in those things comes with a risk and you could also lose it if you don’t have the proper knowledge and information about them. The only way to increase your chance of being successful is by gaining the right knowledge on where to put your money and managing the associated risks.