Lesson 1 of 2 · 6 min read
What your money actually does
Your savings account grows. Your purchasing power might not. That gap is the most important sum there is.
Two percentages
There's an interest rate on your account. There's an inflation rate in the shops. Subtract the second from the first and you know what you actually keep. Earn 2 percent while everything gets 4 percent more expensive, and you have more euros and fewer things. That happened for years without anyone noticing, because the balance did go up. A number that rises feels like progress, even when it isn't.
What inflation does over time
At 2 percent inflation, 100 euros is worth about 67 in purchasing power after twenty years. At 4 percent, 46. That's no disaster in one year and enormous over a lifetime. Which is why the question isn't whether investing is risky, but which risk you're taking: prices that swing, or purchasing power that certainly drains away. For money you won't need for twenty years, standing still is the bigger risk.
You put in $36,000. The other $42,139 is pure compound growth. Time does most of the work.
What saving is for
Saving isn't stupid, it just has one job: money you need quickly and certainly. A buffer for a broken washing machine or three months without income belongs in savings, not in shares. The rule of thumb that works: three to six months of fixed costs set aside, plus anything you need within five years. What's left over is long-horizon money, and that calls for a different decision.
Stocky says
Keep your buffer on a separate account with no card. What you don't see, you don't spend.
Remember this
- Real return is interest minus inflation. Only that counts.
- At 2 percent inflation your purchasing power roughly halves in 35 years.
- Savings are for your buffer and for money you need within five years.
There is a quiz for this lesson
3 questions that check whether it stuck. They live in the app, because a quiz nobody grades teaches nothing.
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