Someone explain this concept of inflation?

[LOLyourFace]

currency inflates about 2-4% every year.

ppl get CD or TBills to earn 2-4% interest per year.

now, what is the point of locking the money away for a year so you could barely beat and match the original facevalue of the previous year?

this boggles my mind. if i'm right, it's much wiser to spend the money right away.

 

[BatmanNate]

So that's how they fit that sheep in such a small package?

 

[LOLyourFace]

Originally posted by: BatmanNate
So that's how they fit that sheep in such a small package?

 

[everman]

Generally someone would put money into a long term CD for example because they're saving for the future, ie: retirement. You would obviously want a rate > inflation to protect your money's worth in the future. If you spend it all now, I'd say you're screwed for retirement.

 

[StageLeft]

Originally posted by: LOLyourFace
currency inflates about 2-4% every year.

ppl get CD or TBills to earn 2-4% interest per year.

now, what is the point of locking the money away for a year so you could barely beat and match the original facevalue of the previous year?

this boggles my mind. if i'm right, it's much wiser to spend the money right away.

Because it's better than putting it in a low yield savings account and perhaps they want to save the money instead of spending it all now...If you are going to buy a $1000 tv now or a $1020 in a year after investing $1000 now yeah you end up the same, but spending all your money today means you can't save any.

Plus if you invest properly you can get a lot higher than 4% a year!

 

[LOLyourFace]

Originally posted by: Skoorb

Originally posted by: LOLyourFace
currency inflates about 2-4% every year.

ppl get CD or TBills to earn 2-4% interest per year.

now, what is the point of locking the money away for a year so you could barely beat and match the original facevalue of the previous year?

this boggles my mind. if i'm right, it's much wiser to spend the money right away.

Because it's better than putting it in a low yield savings account and perhaps they want to save the money instead of spending it all now...If you are going to buy a $1000 tv now or a $1020 in a year after investing $1000 now yeah you end up the same, but spending all your money today means you can't save any.

Plus if you invest properly you can get a lot higher than 4% a year!

so basically, i Am right. it's just given and accepted that if you were to save money, be prepared to lose its value every year. Tbills and CDs are meant to barely just keep up with its original value, not for earning extra interest...

correct?

 

[LOLyourFace]

^

 

[wyvrn]

If you put your money into a normal savings account, yes you will lose value. But, having liquid funds in case of emergency is a wise idea. The balance is keeping just enough to cover emergencies and not too much that you lose a lot of value.

There are plenty of investments that yield more than 4%. Real estate, stocks, mutual funds, IRA, 401K, precious metals, etc..

If you spend all your money today, what happens when you cannot work and take care of yourself? That time comes for everyone, we all age and die. By spending your money today, you are ensuring yourself a hard future.

 

[zephyrprime]

I agree with LOL to a certain extent. Darn fractional reserve banking!

 

If you spend your money, it's gone - if you need it at some other time, you can't get it back.

Inflation right now is relatively low, so a savings account is a good mix of interest rate and liquidity of funds. However, investing in real estate is a great option if you've got the funds - you get a tangible piece of property to use, AND it's guaranteed to go UP in value.

 

[StormRider]

Inflation is just like being naked and seeing a hot girl in tight clothes walk in front of you. You penis becomes inflated.