How Does Inflation Affect Your Savings?
A Fed example: a 6 percent rate with inflation jumping to 7 percent moves the real rate from plus three to minus one.
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1.What is the simple link between real and nominal rates?
A Fed example: a 6 percent rate with inflation jumping to 7 percent moves the real rate from plus three to minus one.
2.A bicycle costs 1,000 today and inflation is 3 percent. What does it cost next year?
If your savings do not grow by thirty, your bicycle moves away from you.
3.After five years at 3 percent inflation, what is Marge's cash of 10,000 worth in today's prices?
Marge lost 1,374 of buying power though her balance is unchanged.
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Sources (2)
- Federal Reserve Education / St. Louis Fed, Getting Real About Interest Rates
- Eigene Berechnung (Decimal, Python-Nachrechnung)
Education only. Not financial advice.