Inflation calculator: In today’s time, a fund of Rs 1 crore may seem very big to you. Because you think that with this you can easily buy a house, can meet the expenses from the child’s education to their marriage… can fulfill the dream of traveling in the country and abroad and can fulfill all your needs.
But, have you ever thought that when you retire after 10, 20 or 30 years, will this amount be enough for you? The truth is that due to inflation, the value of money also decreases with time. The amount that seems enough to you today may not be sufficient to fulfill all your needs after retirement in the future.
Today we will tell you how inflation gradually reduces your purchasing power and why we should do long term financial planning.
How does the value of money decrease with inflation?
Having Rs 1 crore in your bank account seems like a big deal today, but it will not be enough to meet your financial needs in the future. This is because the value of money decreases over time due to inflation. If the price of a car today is Rs 8 lakh, then after 15 years its price will be more.
To understand this in a simpler way, remember how much you used to spend on groceries or rent 10 or 15 years ago and how much more you are spending today in comparison to that. Because due to inflation, the prices of things are increasing with time. Take the example of gold, look at the price of gold 20 years ago and its price today, you will easily understand. Therefore, even though a fund of Rs 1 crore seems big to you today, it will not be enough to fulfill all your needs in the future.
Know the value of Rs 1 crore after 10, 20 or 30 years
According to the Inflation Calculator, if we assume an inflation rate of 6%, then after 10 years the value of Rs 1 crore will decrease to Rs 55.84 lakh. This shows how much impact inflation has on long-term savings and investments.
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At the same time, assuming the inflation rate to be 6%, after 20 years, the value of 1 crore rupees will be approximately 31.18 lakh rupees. And if we talk about after 30 years, then the value of 1 crore rupees will be approximately 17.41 lakh rupees according to the inflation rate of 6%.
Why is long term investment planning important?
The falling value of the rupee over time indicates how important it is to plan for retirement keeping this depreciation in mind. We often do financial planning based on today’s purchasing power. But, over time this purchasing power gradually decreases.
Know how the value of your investment decreases over time
You also have to understand that if an investment gives you a return of 6%, then you are not getting any special benefit from it because the inflation rate of 6% means that even after getting a return of 6%, the value of your money remains the same. Therefore, investments that give you a return higher than the inflation rate are considered to be a better option for long term investment planning.
