Inflation, the rate at which the general level of prices for goods and services rises, can steadily erode the purchasing power of your income. That is why you should invest a portion of your savings at a rate higher than the inflation rate to recover the loss of purchasing power.

This means that over time a rupee will be able to buy a lesser amount of goods and services. If the inflation rate is 5%, then Rs. 100 worth of goods will cost Rs. 105 after a year. The following table indicates how the value of Rs 1,00,000 will change over time at different levels of inflation.

Inflation % p.a.
Years	2	3	4	4.5	5	6
5	90,573	86,261	82,193	80,245	78,353	74,726
10	82,035	74,409	67,556	64,393	61,391	55,839
15	74,301	64,186	55,526	51,672	48,102	41,727
20	67,297	55,368	45,639	41,464	37,689	31,180
25	60,953	47,761	37,512	33,273	29,530	23,300
30	55,207	41,199	30,832	26,700	23,138	17,411

Table indicating the value of Rs 1,00,000 at different levels of inflation over time.

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