18. Swabeng Discussion: Inflation

Remember the last post about the rising cost of goods and services over time?

We'll try to understand the reason behind it.

Do you also know that this is a Silent Peso-Killer here in the Philippines.

Inflation is basically defined as a general upward price movement of goods and services over a period of time. As time passes, the costs of goods and services increase, making the value of your money decrease over time. There are several factors (will try to add some soon) that determine inflation rate on a monthly and yearly basis.

Inflation is inevitable. No one can escape from it. Take a look at the chart.

Notice that its rising. However, were fortunate that its still a bit low compared with recent years.

Do you have any idea how high it went?

That's more than 50% during the early to mid-80's


Let's say annual inflation is at 3.00% (This is just a safe assumption), you need to make your money work to gain at least 3.00% (to break even) or gain much higher.


I have an example of what would happen to your one-million pesos (deposited one-time) in 15 years given that it's untouched (withholding taxes and other fees are not yet included).

While your money at the bank may still value around one-million, its buying power would significantly reduce over time.


Still not convinced? You may try this and give some variations and I'm sure you'll agree that the end result would still be the same.


Anyway till the next...