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Inflation - Definition
Below, you'll find a definition of this investing term...

Definition: This is the idea that things will cost more ten years from now than they do today.  When prices are rising, we call it inflation.

TeenAnalyst Advice: Inflation is bad for investors because it eats away at their rate of return.  It's also a critical reason why people should invest their money.

There's a cost to keeping your money in cash.  That cost is that it won't be able to buy as much in the future as it will today.  If inflation is 3.5% per year (the historical average), it means your money is losing 3.5% of value each year.  So if you're earning less than 3.5% in interest, you're actually losing money.

 

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