In a quaint little town, there lived a wise old man named Arjun, known for his simple yet insightful stories. One evening, as the townspeople gathered around him at the local tea shop, the conversation turned to the recent ₹ 2 increase in milk prices.
“Arjunji,” a young man named Raj asked, “why should we worry about such a small increase? It’s just ₹ 2.”
Arjun smiled, sensing a teaching moment. “Raj, let me tell you a story about the hidden force that quietly chips away at our savings: INFLATION.”
The crowd leaned in closer, eager to hear more.
“Imagine,” Arjun began, “ten years ago, in 2011, you could buy a half-liter packet of milk for ₹ 13. Fast forward to today, that same packet costs ₹ 24. That’s a yearly increase of about 6.32%. Now, what does this mean for us?”
Raj and the others exchanged puzzled looks.
“Let’s say,” Arjun continued, “you had ₹ 10,000 back in 2011. With the way prices have risen, that ₹ 10,000 is now only worth about ₹ 5,418 in terms of what it can buy. You might have fixed deposits in the bank earning interest, but inflation has a way of eating into those gains.”
The villagers started to see the point, nodding in agreement.
“Imagine,” Arjun went on, “you invested ₹ 50,000 in a bank deposit earning 7% per year, while inflation was rising at 6.5% per year. On paper, your money grows, but in reality, its purchasing power stays almost the same. After ten years, your ₹ 50,000 becomes ₹ 98,357, but what you could buy with ₹ 50,000 now costs ₹ 92,282. So mathematically, you’ve only gained ₹ 6,075 in real terms.”
The realization began to dawn on the crowd. They had always believed their savings were growing, but now they understood how inflation was quietly eroding their wealth.
Arjun continued, “Now, imagine if inflation increases by another 1-2% and stays high for a long time. What you’ve saved might not be enough to cover your needs. This is already happening to many people, but they don’t see the connection between inflation and their savings.”
A woman in the crowd spoke up, “So, Arjunji, what can we do?”
Arjun smiled gently. “You need to invest in something that grows with inflation. Fixed deposits and savings accounts might feel safe, but they often don’t keep up with rising prices. Equity and equity-linked investments, though riskier, can offer better protection against inflation. If you don’t consider inflation in your planning, your investments might not meet your needs in the future.”
The crowd sat in thoughtful silence, absorbing the wisdom Arjun had shared.
“Remember,” Arjun concluded, “inflation is like a quiet thief. If you ignore it, it will slowly take away the value of your hard-earned money. But if you plan wisely and invest in ways that outpace inflation, you can protect your wealth and secure your future.”
As the villagers dispersed, Raj and the others left with a newfound understanding of how even small changes, like the ₹ 2 increase in milk prices, were signs of a bigger issue they needed to tackle. And they knew that with Arjun’s guidance, they could be better prepared for whatever the future held for them.
So the next time when you initiate goal based financial planning please factor in the INFLATION.
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