February 11th, 2011 
Vijaianand 
Lately we been hearing lot about inflation from all over the world. It is going up drastically in many parts of the world because of harsh climate and economical aspects.
BTW, What is Inflation?
Inflation is the general rise in price of goods and service over a period of time. In US, inflation is considered 3% in a average per year. Inflation affects every consumer spending on day today life.
Inflation can affect different areas of the economy at different times. Currently because of the climate conditions, crops are getting damaged in many parts of the world so the prices of food items like Corn, Sugarcane is going up. It pushes the prices of Ethanol and Sugar. That’s one example of inflation in food side. Similarly how other items like Housing, Transportation, Utilities are going up during a period of time will give a picture about overall Inflation.
Inflation is measured by the Consumer Price Index (CPI). Click here to see the detail chart and understand how different parts of goods and services used in our daily life are affected.
How we will be affected by Inflation?
Because of the Inflation in prices of goods and services, a dollar which used to purchase a certain item with certain quantity will be able to purchase only less quantity next year or time goes on. So the dollar/currency value diminishes which means worth of the currency goes down every day so a dollar worth today won’t worth same a year after. For example, during my last visit to India (Jan 2011), I witnessed a 500% increase vegetable prices and 50% increase in other commodities because of weather and economical conditions. That’s not good for middle class family.
Because of that reason, you would have to save more and beat the inflation by growing your money by gaining interest for it. Save more now and take advantage of compounding magic and also invest wisely to beat the inflation pest which can make your money worth less in the future.
Link courtesy: mymoneyblog.com