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Frequently Asked Questions
What is inflation?
Inflation is the rate at which the general level of prices rises over time, reducing purchasing power. At 3% annual inflation, something costing $100 today costs $103 next year and $134 in 10 years.
What is the average inflation rate?
US historical average: ~3.5%/year. UK: ~3%/year. India: ~5-6%/year. Pakistan: higher in recent years. Central banks (like the US Fed) target 2% inflation as the ideal for economic growth.
Why does inflation matter for savings?
If your savings earn less than inflation, you're losing real purchasing power. A savings account at 2% when inflation is 4% means your money loses 2% of real value annually. This is why investing in assets that outpace inflation is important.