What You Need to Know About Inflation

Inflation is a way of estimating how much prices for goods and services will change over time.
It makes things more expensive to buy, so you need more money to get the same amount you could buy before.
Inflation occurs when the supply or demand for money increases.
When more money is available than people need, they spend it on goods and services.
This action results in higher prices as suppliers raise their prices because they can’t sell all of their products at current prices if they keep them small.
Inflation is a method of forecasting how much prices for goods and services will fluctuate over time.
It raises the cost of purchasing items, requiring more money to obtain the same amount as before.
The best-known consequence of inflation is the decrease in the purchasing power of money over time. Although prices continue to rise, that is not all. As inflation takes hold and the cost of goods continues to climb, it will affect your life in ways you can’t imagine.
As a result of this action, prices rise because suppliers can’t sell all their products at current prices if they keep them small.
Inflation is the increase in the general price level of goods and services over a given period. It means that prices for most things—from food to clothing to cars—are rising and that you need more money to buy them.
Because wages are usually lower than the inflation rate, employees experience a reduction in their purchasing power. For example, if an employee earns Ksh10,000 per day and the price level increases by 10%, this is a 10% reduction in purchasing power.
Inflation can also affect investments, although not all investments suffer from inflation. Some investments do well in times of inflation and others do poorly. For example, stocks (shares of ownership in a company) are often good hedges against inflation because companies tend to pay dividends when times are good—and dividends tend to increase with inflation.
Bonds (debt issued by corporations or governments) and real estate may gain value over time because they are “inflation-proofed” by contracts that keep their prices stable. Other assets, such as fine art collectibles, are not guaranteed against changing values, but they can still be considered “safe” if their owners have the skill and knowledge required to identify opportunities when markets change rapidly due to unexpected events (such as natural disasters).
Inflation is not a good thing for anyone in Kenya, but it can be especially difficult for parents raising children. When you’re paying more money for food, clothes, and other necessities every day, it becomes even harder to save money to send your kids to college or put them through private school. Inflation also makes it harder to plan for retirement by making it less likely that your savings will go as far as they should when you retire (and live off of them).
Inflation can make planning for the future virtually impossible. If prices rise consistently over time and interest rates remain low, then saving money doesn’t work very well because inflation will erode the value of any savings you have in the bank or under your mattress!
Read on how to handle inflation during the ongoing geo-political unrest.

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