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Search for an ETF or holding
Search for an ETF or holding
Updated 2mo ago.
Updated 2mo ago.
Inflation is the general and sustained increase in the prices of goods and services in an economy. It reduces the purchasing power of money: over time, the same amount of money buys fewer things.
In Canada, the Bank of Canada targets an inflation rate of 2% per year. In 2022, inflation hit 6.8%, a 40-year high. In practical terms, if you kept $10,000 in a savings account earning 1%, you lost about 5.8% in purchasing power that year.
This is why investing is essential. An ETF like VEQT.TO with a historical return of about 8% per year far exceeds inflation, preserving and growing your purchasing power. Conversely, leaving your money idle in a chequing account slowly erodes it.
Inflation is the silent enemy of savers. At 2% per year, your money loses half its value in 36 years. This is the main reason why you need to invest rather than just save. Your investment returns must at least beat inflation for your real wealth to grow.