Glossary
Inflation
Inflation is the rate at which the general level of prices for goods and services rises, reducing what each dollar can buy. The Federal Reserve targets an annual inflation rate of approximately 2%.
Why it matters
Inflation is a silent tax on cash savings. Money sitting in a checking account earning 0.01% loses purchasing power every year. At 3% inflation, $100,000 in cash has the buying power of only $74,000 after ten years. This is why investing — not just saving — is essential for long-term wealth preservation.
Example
At 3% annual inflation, something that costs $100 today will cost $134 in ten years. Your savings need to grow at least 3% annually just to maintain purchasing power.
How Ray helps
Ray helps you understand whether your savings are keeping pace with inflation. Try to see if your money is growing in real terms or losing ground.
$ ray "is my savings rate beating inflation?"Related terms
APY (Annual Percentage Yield)
APY is the real rate of return on a savings or investment account, accounting for the effect of compounding interest.
Compound Interest
Compound interest is interest earned on both your original principal and on previously accumulated interest.
Time Value of Money
The time value of money (TVM) is the principle that a dollar today is worth more than a dollar in the future, because today's dollar can be invested to earn returns.
Yield
Yield is the income return on an investment, expressed as a percentage of the investment's cost or current market value.
Savings Rate
Your savings rate is the percentage of your income that you save or invest rather than spend.