Inflation
The gradual rise in prices over time, which reduces the purchasing power of money.
Inflation is the general increase in prices across an economy. As prices rise, each unit of currency buys a little less, which is why long-term plans typically assume costs will grow and aim to invest in assets that can outpace inflation.
Examples
- If prices rise 3% per year, something costing $100 today would cost about $103 next year.