What is Inflation?
In Penang, a plate of roadside ‘char kway teow’ costs RM3 in the year 1980, and in 2018 it could cost up to RM8.50. This is called inflation.
In 1980, you can buy lots of things with RM100. Today, RM100 might not be enough for shopping. This is caused by inflation.
Inflation decreases the value of a ringgit over time. It increases the prices of goods and services over time. If you keep one ringgit in a Milo tin at home today, then one year from now, that one ringgit will be worth less. As each year passes, there are lesser and lesser things you can buy with RM1.
So How Does It Affect Me?
Inflation decreases your buying power. You have to pay more to buy the same things. If your income doesn’t increase, or increases slower than inflation, your buying power becomes worse.
Inflation affects your retirement planning too. As time goes on, the savings you have will buy you less and less things. Your savings must keep increasing to pay for the same lifestyle.
What Should I Do?
It is best to put your money somewhere it can grow. If you put your money in a Milo tin or plant it in your garden, it won’t grow! Let your money work for you. Put your money into savings or invest it so you can get returns. Start your planning as soon as possible because investing with time makes a huge difference.
Not only that, you need to make sure that the returns you get is higher than the inflation rate. If you’re still far away from retirement, it is highly recommended to invest your money. But before you start your investments, make sure you have your financial planning laid out.
To be prepared for inflation during your retirement, you should save more than you think you will need. Are you starting to wonder whether your retirement savings are enough? Set a higher target! Better to be safe than sorry.
