Did you know that our money used to be very different back in the day? It’s all because the United States decided to let go of the gold standard, and this change transformed our money into something more like a promise. In simple terms, it’s like the money we use today is a type of debt, and this debt can shift in value over time because of some important factors.
Inflation: The Money-Maker:
Warren Buffett once said something really smart. He said, “Inflation is man-made, maybe we can figure out how to control it.” What does that mean? Well, inflation is like a sneaky monster we create ourselves. It’s all about the amount of money in our pockets and wallets growing, which then causes prices to rise. We saw this happening recently during the pandemic when a lot of money was pumped into the economy, and prices started going up.
Your Money’s Shrinking Power:
Let’s take a look at a simple example to understand. Imagine you had $100,000 in your bank account in 2023. Sounds like a lot, right? But if you fast forward to 2033, that same $100,000 might still be there, but it won’t be as powerful. It’s like it’s lost some of its strength, maybe it’s more like $80,000 now. Why does this happen? It’s because of something called inflation, and it’s like a secret tax that affects every dollar we have.
How to Keep Your Money Safer:
So, how can you make sure your money stays strong and doesn’t get eaten up by inflation? First, you can try to get a job where your income goes up faster than prices do. That way, you can keep up with the cost of living. Second, you can be a smart money manager. That means investing your money in companies that are doing well and growing faster than inflation. It’s like planting seeds that grow into bigger plants.
The Trust Issue:
But here’s the problem – not everyone knows about these money tricks, and some people don’t trust the whole money system. That makes it harder for them to protect their money from losing value.
In a nutshell, our money has changed a lot since it stopped being tied to gold. Now, we have to deal with something called inflation that keeps making it lose its power. To keep your money safe and strong, you need to learn about how it all works and make good choices with your money. This way, you can make sure your money stays valuable even as the world changes around you.
Joshua Krafchick | 369 Financial