Why Your Money Will Die Before You Do & Why You Can't Do Anything To Stop It

I’ve been thinking & reading all your amazing comments on the last post! Thank you so much!

It led me to think about how & why unconscious, un-informed and financially paralysed people will sit back and watch their wealth fade away in a whole new light.

See in the last post, when I was at Boisdale, my question was “Why do most people do everything for a 3% “chance” of success but won’t lift a finger on a 92%  “Proven” success rate…?”

I was reading Richard Teare’s comment and I found this line fascinating:

Now, a 92% success rate is HIGHER than anyone else’s success rate worldwide, and we have it documented, it’s not just number’s we’re throwing around…

So the real question is, why would everyone else, who doesn’t join, sit back and watch their wealth fade away?.. While they take these gambles on other courses, schemes and new techniques.

We’re all programmed to believe that the “next thing” we try is going to be the solution, BECAUSE what I have now in Dollars/Pounds/Euros is ALREADY SAFE. When the real answer is, taking a simple action BETTER RIGHT NOW is the true answer.

And I THINK that the reason why we are trained to look for the next thing with financial education is that we just don’t understand how dangerous this thing called “inflation” is to our current wealth. If we did we’d look at it TOTALLY DIFFERENTLY.

See while you’re chasing a potential profit, a phenomenon called “Inflation” is eating away at your current wealth. They designed it to do this.

We’d rather focus on building more wealth and taking the “chance” to make more, than we are interested in an almost guaranteed way to protect what we have & grow it, because of the way inflation is perceived. Because we see dollars & pounds in the bank. Because you just do NOT understand the severity of Inflation.

If you will allow me to patronise just you a little bit in order to help you, you just DO NOT understand the severity of inflation. People “know” inflation.

They “know” that their money at the end of the year will be worth 96.4% of what’s currently there. We also “know” that we need to lose weight. We also “know” that we need to exercise more. We also “know” that we need to go to Church more.

“Knowing” is nothing. Action is everything when it comes to wealth. I think that’s another reason why our success rates are high, we almost FORCE you into action. Anyway…

PROMISE – if I can explain to you the true implications of inflation and why “Wealth” is NOT “cash” – and why because of inflation you need to take ACTION now, and I can do that in this ONE blog post, then I can also get you rich.  

So let me explain to you, exactly how much of a problem this is. Is that okay? If you want wealth for the rest of your life and in this cycle you’re not diversified in inflation fighting assets, like Gold & Silver, you’re really going to struggle. Want to see why?

A “Reduce The Debt Tax”

Well, lets say, that right now, in this moment, the government set an objective to reduce the debt IMMEDIATELY through taxation. Say they put a 10% “Reduce The Debt” tax on your earnings & existing cash savings in the bank.

You had to hand over, 10% of your cash wealth, on demand, to the government.

Firstly, is that fair? How “in control” would that make you feel? Would it make you hate or like the government? Would that make retirement and the future more or less secure for you?

Now let’s say that there was a second part to this “law” which stated that this “tax” was to be paid every single year. Even if you’ve already paid it.

So year 2 comes along, and even though you paid 10% on last years earnings, you have to pay 10% again on the savings you made from last years earnings.

That’s not cool. That’s the sort of thing that would cause riots, revolutions and civil wars. It’s the sort of thing that even Hitler wouldn’t consider doing.

It would be a direct violation of your right to live and make money & enjoy life. And I’m sure that if the law didn’t change fast, you’d leave the country.

I mean whats the point of getting a job if not only do you have to pay taxes to the government for EARNING the money, but you also have to pay taxes on saving it. It would make you a deeper and deeper slave to your financial commitments and life just wouldn’t be that good.

I guess the worst part is, that you don’t even have a say in it. It “must be done” to reduce a debt that you weren’t even responsible for. It’s sort of like someone just wants to strip you of your control over not only your immediate wealth but your future & families future too…

You wouldn’t accept it.

Well, the scariest part is. It’s real. They just don’t call it a “tax” because then you might be motivated to stop it. So they built it right into the Cash-Matrix they force us to use.

No matter which Government is in power, the monetary model we live under, Dollars, Pounds, Euro’s etc… Are controlled and the values of these currencies inflated and deflated to create wealth for the few, jobs for the many and power for the top through currency supply manipulation & it’s getting faster and faster as they rush to keep up with the interest on the debt already outstanding.

They print more and more money to pay interest on the “national debt” that you are responsible for as a citizen, but didn’t create, and the more money they print the less each dollar/pound/euro is worth, it’s a simple supply & demand situation.

Imagine with me if you will, let’s take John. John represents the average investor. John is 54, worked all his life, owns a small business with his wife, then a few years ago saw the opportunity in Real Estate, he bought a few properties, flipped them, then just as he transitioned into building his portfolio for long term financial security, the property market crashed in 2010.

So right now, John is STILL sitting on $200,000 of cash, a property portfolio that’s washing it’s face most months, paying for the basic needs monthly. His business is doing okay, his children are just about to finish university to start their lives and his wife is a little, to say the least, disappointed with the performance of the property portfolio.

But John is a smart guy, he was taught to keep everything in cash in hard times, so he’s been stock piling cash every year whenever he can. Thinking he’s been smart, John wanted to invest in Gold & Silver when the property market crashed, but due to the fear of his wife, he decided against it in 2010, when SLV was at a low of $15.70.

Amount of Silver John could buy in 2010: 12,738 ounces

Amount of Silver John could buy in 2013: 7,185 ounces. – 43% LESS.

Now he can only buy 7,185 ounces. His buying power and opportunity to secure his wealth is COLLAPSING. The longer he waits and resorts to his conventional education instead of moving with the times, the poorer John will be in the next 8-10 years.

Question: has the value of Silver gone up, or the value of his $200,000 gone down?

Let’s look at this – a Mars bar cost 27p in 1990. I was in a shop yesterday and checked the prices, and the price of a Mars bar was now 79p.

That’s a 292% price inflation in 20 years. Now has the MARS BAR changed in value? Or has the currency become worth LESS, so now we have to pay more money for the SAME product?

Hmmm? The value of the currency has fallen. This is REAL inflation. And based on

Mars Bar prices, that’s 14.6% PER YEAR over 20 years, not the bullshit 3% rate the government publicises!

Now, Silver in 1990 was $4.83. And today it’s at $28.83. That means Silver has gone up by 658% over a 22 year period! That’s 29.90% per YEAR.

The good news is, Silver’s only gone up from $15.70 to $27.83 since 2010. And we haven’t even entered a period of high growth yet. Which means there is HUNDREDS of percent on the upside left to go. Even if John goes all in now, and Silver goes to it’s historical high of $50 ONLY, he stands to make: $159,000 PROFIT. And thats without having his wealth depleted by this “Reduce The Debt” tax. Lots of profit ahead, if you act.

You see, Inflation, is a “stealth tax” as described by The Economist. I love this phrase.

John doesn’t know he’s being taxed. He still see’s $200,000 in the bank. But his ability to protect himself, is collapsing fast. This means the Bentley John wanted to treat himself to as a reward for success in retirement, won’t be there. The ability to take 4 holidays a year with his wife in retirement, won’t be there. The ability to buy his 2 children properties to get them started, won’t be there. And finally, John will continue to be a slave to his financial commitments well into retirement, and with the way the Government is going, probably well after he’s dead.

That, is what Inflation does to you. Without you even KNOWING.

The problem that John doesn’t understand is that even though this is a 10-20 year problem, and he’s more worried about the present, is that the decision and action needs to be taken TODAY.

How Inflation Will Kill Your Dreams

Did you know that John has been saving for his daughter’s wedding, $50,000 is already ear-marked in John’s mind for his daughter’s wedding. Now let’s take a look, to have an accurate look, using this simple Inflation calculator, and plugging in inflation at a LOW estimate of 10% per year on prices (assuming it doesn’t speed up or anything) this is what happens to John’s dreams:

John has a $200,000 cash-fund. Let’s look at some realistic 10 year goals: (ignore the $ and £ differences as the percentage is what’s important)

$50,000 for his daughter’s wedding:

 

 

 

 

As you can see here, John will need a fund of $129,687.12 in 2023 to provide the SAME quality of wedding for his daughter. In effect, if he doesn’t act now, he’ll need 3 TIMES the amount of money he has ear-marked to actually pay for the wedding. The killer is, John won’t FEEL this until it’s time to look into his baby girl’s eyes and tell her that she’s going to have to scale her wedding down 3 times because he didn’t see this coming.

John’s effort of saving the $50,000, all that work, all that effort, all those cut backs & sacrifices he made in HIS & his wife’s lives will only be worth an equivalent of $17,433.92 in 10 years. Why? Because he chose to leave his wealth in their cash-matrix.

$100,000 retirement fund:

 

 

 

 

When John was supposed to retire in 10 years, the $100,000 he put away, would need to be $259,374.25 in order to give him the SAME lifestyle as $100,000 buys now.

More importantly, John leaving his wealth in their cash-matrix would mean that his $100,000 that he saved up, sacrificed and sweated for, in order to give his family a 6 figure lifestyle, will only be able to afford him a lifestyle of $34,867.84 in TODAY’S money.

What’s the point of working for all that money?

It’s a beautiful system from “their” perspective, because we have been “trained” to look at money and wealth as the final sum, not what it truly represents, buying power.

Even though John was smart getting a cash-fund together, in an inflationary environment it doesn’t even matter, his smartness and planning and superman qualities go away in an instant, because he’s still playing THEIR game.

And it’s more important than ever for John to take action RIGHT NOW. He and YOU are at cross-roads.

Take a left, and you leave your money “secure” and “safe” in the cash-matrix and it will be robbed from you without you even knowing.

Take a right and you can live the lifestyle you want. How can I make this more clearer?

Let’s Compare Investments – Mars Bars, Silver & British Pounds

Say we had £100,000 in 1990.

Scenario 1: We buy £100,000 worth of Mars bars in 1990.

Current Real Portfolio Value: £292,000 – pretty good investment right? Imagines if those Mars
Bars lasted all this time!

Scenario 2: We buy £100,000 of Silver in 1990

Current Real Portfolio Value: £658,000

Scenario 3: We have £100,000 in British Pounds since 1990.

Current Real Portfolio Value: £51,020.41 (to 2010)

The problem is, with Scenario 3 – you still visually SEE £100,000 in the bank, only when you go to SPEND it, do you feel the hit. So you’ll feel safe, until you need the actual protection!

Take a look, say we chose Mars Bars to protect our wealth, we need to buy as many bars as possible, the more Mars Bars we own, the safer and richer we are…

Amount of Mars Bars £100,000 would buy in 1990: 370,370

Amount of Mars Bars £100,000 would buy in 2013: 126,582

You still THINK you’ve got £100,000? Really?

So what actually changed here? Did the asset change? No, the amount of Pounds it takes to buy those assets went UP, which means the value of your cash went down.

While Inflation exists & accelerate in this Monetary System, Gold & Silver will continue to go up because they are STORES of wealth that cannot be printed and manipulated. That’s why you need to act now.

In addition Gold & Silver are money, they have repeatedly been used as money, so when the value of those Dollars/Pounds or Mars Bars is diminished, the value of money will return to Gold & Silver in some form. So the ones that will benefit most are the ones who own the MOST amount of Gold & Silver, get it? The length of time you stay in the cash-matrix determines how much or how less Gold & Silver you can buy.

THIS IS HOW DANGEROUS INFLATION IS.  Do you now see how powerful this force of inflation is in killing your profitability? Can you understand why you need to act to protect yourself against this? Can I show you how to defend against this?

Let’s apply this to YOU & Look at the biggest problem.

When you wake up at the end of year 1 and still have $100,000 sitting in the bank, you feel great. But do you really have $100,000 sitting in the bank? No. Because last year that $100,000 could buy you so much more than it can this year.

You kept the same money, but lost wealth, it was taken from you, and you didn’t even know it.

Just by holding your “Wealth” in the form of currency they create, you’re giving them power to devalue, steal and manipulate your wealth, just by holding it in “cash”.

How does it feel to have no control of your wealth? Even though you feel “safe” having money in the bank, what you’re doing is simply opening your wallet up and handing it to the thief to take what he wants. And when you let someone take what they want, they normally take everything…

The government is now trying to print more money, to service to debt it’s already created with no hope for economic growth, and the debt spiralling out of hand, they’re going to dig you & me into a deeper deeper hole, because at the end of the day, WE are responsible for the debt.

That’s the game that inflation is playing. It’s a game of deception. And it’s only getting worse as they print more and more money. USA just signed up to QE Infinity with $45bn- $85bn a MONTH being printed now. It’s a real problem, and they’re being very sneaky about it.

IMAGINE – if there’s been a 292% price inflation over a 30 year period, and then one president has printed in the USA the same amount of money as all the previous presidents do you think that PRICES might start going up FASTER now, than before? Yes.

That is what YOU must stop happening to your wealth. Period. That’s what I’m here to help you do.

What is “Money” to Billionaires?

It’s really and honestly, not your fault. We’ve been trained to look at our “wealth” and judge it by the amount of Dollars or Pounds we have. Not by the amount that those Dollars & Pounds can BUY.

Billionaires look at their WEALTH as a representation of what they can BUY.

They have stepped out of the “cash-matrix”. The cash matrix, is “their” system, “their” rules. Cash is “THEIR” creation, and you’re trying to win in a game of “their” rules.

Do you think you need to beat this thing called inflation? Do you now know how it’s screwing up your financial future? Do you think that by stepping out of “the cash matrix” you too can get your dreams? Be in control fully of your wealth? Be happy with the continuing pursuit of wealth knowing your money’s not just being stolen from you?

Is this making sense? I’m really trying to make this simple, so you get it, it frustrates me that smart investors I talk to, will sit in front of me, say they “get it” and then sit with cash in the bank, not doing anything.

Do you now understand the importance of learning how to not let inflation have a grip over your wealth? And why holding wealth in CASH is the biggest disease to your wealth in existence?

There is a growing community within Gold For Life that wants to SAVE people.

Why do we pick Gold & Silver? I’m going to explain this to you in the next post, there is a specific reason why NOW is the cycle, the best “time” to invest in
Gold & Silver.

Look, if you’re going to invest in something you might as-well invest in the thing that’ll make you the MOST profits, right? When Gold & Silver are now in a cycle that will make them run up and hit the roof because of inflation, you want to be positioned in that right?

Shouldn’t YOU Be Protecting Your Wealth Like The Billionaires & Central Banks?

More importantly, you want to be positioned in Gold & Silver the way the BANKS and the Billionaires are to make the MOST money, yes? Not the way the retail market is trained to do it right? You want to be ahead of the curve, not behind it.

And if the central banks are buying and securing their Gold holdings to “hedge a currency risk” then shouldn’t YOU be hedging your risk in £, $ & € too?

Germany recently stated that it is requesting half of it’s Gold from the US Fed within the next 8 years, and that this move is a “pre-emptive measure incase of a currency crisis”. That clear enough? Even “they” are hedging against “their” system.

Look, inflation is here to stay, in-fact, like Billionaire Frank Giustra, I don’t believe that we’ve even SEEN inflation yet.

There is a reason why our students are up 2.2% per month on average documented, because we step totally out of the “matrix” and actually copy the way the banks do it.

Is this making sense? Can I teach you some more about this?

The way WE do Gold & Silver is different, it allows investors, like with real estate to generate a cash-flow while holding their Gold & Silver.. More on that later.

But, after reading the first post and now this one, can you see how a system that puts you 2.2% UP per month, in addition to Gold & Silver going up would leave you much better off financially than “their” system of pushing your wealth 10% down each year? It’s a triple bonus, on the same investment.

Would it help if the strategy I teach you was proven to work with a 92% success rate?

If you’d like to do that, check my post in 2 days time and I’m going to walk you through the power of Gold & Silver for THIS cycle. Now. Why it’s important to do this now.

A system like this, could be the very financial solution you’ve been looking for for growing your wealth simply, consistently and rapidly over the next 10 years…

In two days i’m going to let you into WHY Gold & Silver are the only solution for rapid, secure and fast wealth growth over the next 6-10 years & then how the banks & Billionaire’s do it to make sure they make more money than YOU.

Is this information helping you? Would understanding the power of Gold & Silver help you? Would it feel good to have your retirement and financial security certain for the next 6-10 years?

I need to know that you SEE how learning to defend yourself against inflation will benefit you & your family for the next 6-10 years. Is that the case?

The problem is, I can say to you “go and buy Gold & Silver” – doesn’t take a genius to work out that Gold & Silver is the answer, but what are the different ways to buy Gold & Silver? What if I told you that if you do it the way the banks & hedge funds & Billionaires do it, you can make 10x more money than the way a retail investor that buys bricks & coins make? What if I told you that YOU can invest & make money the way the banks, funds and billionaires do it, starting with just £5,000?

Does that sound interesting?

Then we will continue. Speak to you in the next post.

Minesh Bhindi
www.GoldForLife.com

P.S. The Gold For Life Investment System, which you can find out about here, has been shut, since November 2012. We only take 25 new students every 2-4 months. We will be opening up 25 more places very soon, if you want to be put onto a “waiting list” to have a first chance at getting in, please email my assistant Isabel at: Isabel@GoldForLife.com with your phone number and “WAITING LIST” in the subject line & she’ll put you on the list.

We always fill up. This will be faster. The momentum is building. People are loving the system. And as every month goes by, as every student makes more money, more and more people want to join the community. Don’t miss out. Get on the waiting list NOW.

SCHOLARSHIP – I decided that our collective mastermind is very important, so I wanted some answers to some questions to allow me to help more people over the next 10 years. And I thought I’d “bribe” you to help me, by giving you a £4,997 scholarship into the GFL Investment System. Sound fair?

Now, in order to actually be in with a chance to win the scholarship, here’s the rules: 1. You must answer every single question honestly, fully & to the best of your ability. The questions are under every blog post, there’s 4 of them. 2. The person who answers ALL the questions best consecutively will win & I’ll be hand picking the winner after reading your comments.

So – there’s the 2nd question:

2ND QUESTION: How do YOU think we could explain the concept of Inflation powerfully enough in a paragraph so that a child could understand it? How could we explain it simply enough for someone with a few thousand dollars in the bank could GET IT and start taking the action to protect their wealth against this financial cancer & guarantee themselves a good life in the next 6-10 years.

We need people to understand the affect of it on their current wealth, how it will destroy their savings they currently have & how they NEED to take action, diversify into different asset classes NOW in order to protect themselves URGENTLY.

I want to be able to stand on stage, say the concept you create for inflation and EVERYONE immediately understands how damaging it is to their wealth, all 300, 500, 1,000 or 2,000 plus people. I think we can really change the world with this & help pull people out the cash-matrix.

Get creative on this one, use metaphors, analogies and explanations, I think if we can crack this little inflation problem, make it easy to understand for anyone, we have a chance of helping many more people than we could do normally… So, over to you.. can’t wait to see your creativity & thank you again for your help 🙂

Answer in the comments…

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74 Comments

Elisabeth Westhead

February 25, 2013 at 8:02 pm - Reply

Minesh
I think fear paralyses. Greed probably tempts people. See…. I am bothering to write this for you because you are dangling a scholarship in front of me. I have a house, several harps, several violins. I believe that my instruments will also go up in value, thought not as handsomely as gold. But to do your course I should have to sell one or two instruments.
I think doing your course and using money in a totally different way is taking a risk. An immediate reward helps to tempt me.
My other worry is about morality. I have been taught that certain ways of making money are immoral. Like climbing on other people’s shoulders and taking advantage of them is immoral. If I went out and bought peoples gold for cash, and then evaluated it and sold it on to professional sources for good rates…. as has been suggested, I should be unhappy. I should want to give the sellers a better rate – probably.
So I think I would be tempted by you playing on my greed. But (I am not pointing a finger at you here) I should also have to feel you were being totally transparent with me and that the deal you were offering is above board and not taking advantage of people – (as well as being legal, of course).

Dan

February 25, 2013 at 8:07 pm - Reply

Hi Minesh,

Another great post. One of my mentors Robert Kiyosaki says it like this “Cash is Trash – Savers are Losers”. Not to say that people who save are losers, but that by saving they’re losing the money game.

One image that I’ve found powerful in demonstrating the effects of inflation is to show what the purchasing power of a dollar is today compared to 40 years ago.
http://dollardaze.org/blog/pages/00024/cad.png

When it comes to gold and silver, it’s not their value that changes, but the amount of paper currency it takes to acquire them. An ounce of gold today will buy you the same thing it did in Roman times – A Toga (nice suit), A belt and a pair of sandals (nice shoes), and a shekel of silver will buy you the exact same thing as well – one chicken.

Inflation isn’t the escalation of product prices. It’s the devaluation or loss of purchasing power of the currencies that are being printed into oblivion.

I look forward to seeing some of the other definitions of inflation your readers submit. My only hope is more people understand this as well as you do.

Best of Success,
Dan Giercke

Peter Hool

February 25, 2013 at 8:26 pm - Reply

A penny black in 1840 cost an old penny, a first class stamp today costs 60 new pence or 150 old pence. Put another way £150,000 in 1840 would only buy £1,000 worth of stamps today.

£12 worth of gold in 1840 would now buy £1,200 worth of stamps.

In terms of gold and postage stamps; £150,000 is worth less than £12. Yes Gold went up and pounds sterling went down by a huge amount measured over a long period of time. Draw the downward curve for your cash based savings spending power when you need the money the most.

Vivek Sharma

February 25, 2013 at 9:26 pm - Reply

If the quantity of money increases more rapidly than the quantity of goods and services available, you’ve got yourself INFLATION.

You have just been blessed with a baby boy. One year from now, you are supposed to celebrate his first birthday. To make a budget, you enquire around about the costs and arrive at an estimate of 100,000 but they cannot guarantee the same price 1 year down the lane, because the cost of materials can go up. So you immediately put this money in a deposit that would give you 8% return by the year end. At the end of year 1, you have 108,000 with you. (Let’s ignore tax).

Now, its one year and you have to celebrate your baby’s birthday. Let’s assume that the inflation during the year was at 10%. That means the general price levels of all products have risen by 10% and hence you are going to incur a cost of 110,000 for a party for your boy instead of 100,000 earlier. So to arrange a party now, you have to incur an additional expense of 2,000 from your pocket. Why? Because, the money you have, has lost its value to the extent of 2,000. And, you could manage to make a return of only 8,000. If the general price levels moves up at this rate, it would cost you more than 250,000 to host your boy’s 10th birthday! Had you managed your money to get a return of 10%, you wouldn’t have to spend that additional 2000 from your pocket.

Many people while measuring the returns on their investment, forget to consider the effect of inflation. But that’s not the correct way to measure returns. Returns calculated without considering the effect of inflation is called nominal return. The return calculated after considering the effect of inflation is known as real return. In addition, if you account for tax implications the real return would be even lower. So next time you have money to invest, keep in mind this ‘Real return’ concept. Real return is what you actually earn from investments -and not the advertised rate of return.

GOLD AND SILVER INVESTMENT

The reverse would happen to gold and silver. Since stocks are not attractive, investors would naturally resort to gold and silver which are safe havens. Gold and silver go up during inflation. The reason is that, as inflation begins to creep up, the purchasing power of paper currency loses it value. Once paper currency has been invested into this precious metal, it will not lose its value as a result of inflation.

Investments in gold protects you from inflation. We will show you how with an example-

Let’s assume that you have £1000 in currency. Inflation is at 8 % and hence at the end of the year, your 1000 is worth only 920. Instead, let’s assume that you bought gold. That move will protect your currency from losing value. How? When inflation goes up, the demand for safer havens such as gold will also increase (at least at the rate of inflation). Hence if inflation rate is 8%, the gold prices will also move up by 8% approximately.

In such a scenario, your 1000 invested in gold is now worth 1080 whereas if the money were held in cash, it would have lost its value to 920. So when you invest in gold , you maintain the purchasing power at the same level . Heavy investments in gold can be considered as a warning sign that inflation is coming

Inflation eats away the value of your money. The only way then, is to target a return on investments that would beat the rate of inflation.

jerome

February 25, 2013 at 10:07 pm - Reply

your mars bar or silver examples are the best example ive heard .go with that.
answer to the first question .many people have given up and hope that government will look after it.
i asked my friend what his retirement plan was and he just stared at the cigarette in his hand.

kitty

February 25, 2013 at 10:17 pm - Reply

imagine…
about 2 years we have our 50 st birthday . we like to go with out hole family to go to
australie . we ask the traveller agent how much we need for our holiday .
he says 7500 dollar. so we go to save money and after the 2 year we have the party and go to the
agent and say …here we are , lets book our holiday. but then the agent says ..no i am sorry ,
it costs 10.000 now for the same trip.! to bad.. thats what inflation means . you can save money , but every year you can do less with it.

Dick Smith

February 25, 2013 at 10:24 pm - Reply

Inflation is like pumping up a balloon with fresh air. Over time the fresh air gradually disappears and the balloon deflates. The same thing happens to money. Over time it’s value deflates. Fill the balloon with precious metal (if possible) and it stays there……..and doesn’t deflate.

Paul Craig

February 25, 2013 at 10:27 pm - Reply

Hi Minesh,

I understand that inflation has and is continuing to reduce our cash purchasing power, but I don’t believe it will ultimately kill my chances to success.

I have been blessed to be able to buy some physical silver and gold to satisfy my needs and I know that there are better ways to accumulate wealth with precious metals after studying what you do at gold for life.

I will become a gold for life student and I know it will be a large part of my financial retirement plan. Why I haven’t quote “taken action” I would say because It hasn’t been my focus. Now that I am acumilating money faster it will be my next logical step.

Thank you Minesh, for all you have done with gold for life. You have a heart of gold, one way or another I look forward to learning for you 🙂

steve teers

February 25, 2013 at 10:48 pm - Reply

Its like owning your own shop where because you sell lots whether it groceries or clothes your landlord decides to increase the rent

Claire

February 26, 2013 at 3:40 am - Reply

Well, I think it is quite a challenge you’re asking Minesh because I see two questions here… If I really want to answer your first question, I must do as if… I address myself and explain to a child, around 12 years old. FIRSTLY I would take time to discuss why money was installed; for its convenience to exchange products or services easily… When understood, I would ask him to make a list of 10 choosen items he can buy today with a 1000$ bill. From that point, I would extend the list at the left for 2 or more years before, showing how much products he could buy with the same amount of money, and at the right for 2 years later or more, with a 2% inflation, how much less he can buy. As the inflation is calculated on the average of a multitude of products, it is necessary that he sees that inflation affects each of the chosen items, but not necessarily with the same %. Also which product, like gold and silver, that actually, because of the inflation, is brigning a sense of security over paper cuts, that with the years, the value of the product do not diminish, but on the contrary, keeps growing. Now, it wouldn’t be finished. If you talk of INflation, you must also talk about DEflation… I am eager to read metaphors and the creativity of your readers… I’m sure some will come up with interesting interventions.

Crystal

February 26, 2013 at 6:00 am - Reply

Here’s how I explained inflation to my young niece. On Monday, the dollar in your pocket will buy you 10 cookies. By Wednesday, the same dollar is worth only 6 of the same cookies. By Friday, $1 will get you 2 cookies. And by Sunday, you will have to borrow money to be able to afford even half a cookie. The same amount of money can buy fewer things as inflation rises.

Richard Treen

February 26, 2013 at 11:38 am - Reply

Again, let’s not beat about the bush…

If you have 10,000 savings and your Central Bank “prints” another 10,000 and gives them to a third party then the money supply has increased. Do you think the value of your 10,000 has: – stayed the same, appreciated or reduced?

Currently this “printing” or “quantative easing”, which sounds so much more sophisticated, is the basis of many Western Governments economic policy.

If you know the correct answer then you should attend the Gold for Life course, if you can afford the fee. With a claimed 92% likelihood of achieving a 26%+ annual return on your capital you can both protect and increase your wealth.

Patrick Clarke

February 26, 2013 at 7:10 pm - Reply

I recently read that £1 today is worth the same as 33 Pence in 1982 in terms of purchasing power. In other words, someone earning £15,000 in 1982 needs to now be earning £45,000 just to stand still financially.

Dana

February 26, 2013 at 8:39 pm - Reply

Most individuals have their money in savings or another account gaining minimal interest with very little growth over time. As time continues to pass, inflation is inevitable causing regular items (including daily necessities) to increase in price, however, at a much larger percentage than your money grows in these accounts. By letting your money sit in a useless bank account, items still increase meaning that you will need to pay more for the exact item in a year than you paid the previous year, however, your money is practically the same amount (if not less) than last year and you continue losing money on a daily basis just by purchasing necessary items you need regularly. This does not even include a desired purchase such as a gorgeous dress or a pair of shoes you just can’t live without, or what about an extravagant meal at a luxurious restaurant. These types of purchases can really set your bank account back while all items continue to raise in price. Without a steady increase in your personal bank account, the fun and exciting purchases tend to be placed on hold to ensure you have enough funds just to live. In my opinion, this is not a perfect scenario in anyone’s eye. We all want to have an abundance of money readily available for all our necessities AND for the beautiful items that literally enhance our lives and make living so much more fulfilled, joyous and exciting. We are all meant to live a life of luxury and the ONLY possible way to ensure this lifestyle is by investing in a “sure thing” that has been proven to work over and over again without fail if done properly i.e. following simple instructions and taking action! It’s a simple process that will change your life forever in ways you cannot even imagine. Take action and reap some serious rewards in a short period of time, or keep doing what you’re doing and continue losing money rapidly living a mediocre life that will continue to worsen in that same short period of time. The choice is yours, you MUST decide which scenario you prefer. It’s a simple decision… You really can have it all and only YOU can make it happen 😉

Richard

February 26, 2013 at 9:08 pm - Reply

A picture tells a thousand words…or so they say. I would use two graphics for this answer.
Graphic 1 will show how, over a 10 year period (or 5 year period), inflation eats away at your $100K cash. So you would have 10 individual bar charts for each of the years. Each bar would show the deterioration in spending power of your cash although technically you would still have $100K in the bank if you don’t spend any of it of course (a 10 year period would probably be more dramatic and hit the message home). I’d track the decline with a red line linked from year 1 through to year 10.

Graphic 2 should track the gold and or silver increases over the same period with an original holding of $100K. It will show the increase by year and again should be tracked by a continuous green line.

If its for a presentation, then after talking about the two graphs individually, the final point should discuss the overlaying of graph 2 over graph 1 (super impose graph 2 over graph 1) – quite dramatic I would think.

richard

February 26, 2013 at 9:46 pm - Reply

When you buy things using money which you get from a job, you have to work a certain amount of time to earn enough to buy what you need/want.
In 1970 I had to work for half an hour to earn enough to buy 1pint of beer (10pence) ( average wage £20 per week).
In 2013 I have to work for quarter of an hour to earn enough to buy 1 pint of beer (£4.00) (average wage £500 per week).
If you are buying out of savings then it is obvious that a much bigger pile of money is needed to buy the things you want now. So to counteract the effects of inflation our savings must be in things (gold and silver are both valuable,portable and desirable both atheistically and industrially.

Fritz Meyer

February 26, 2013 at 10:23 pm - Reply

You have a copy machine. The government has a hugh copy machine.
Would you like to copy your 1 dollar and make many more? Then you could buy more fun things.
Problem is, you can’t do this but the government can.
Now the government prints many,many, dollars and gives them to others so they can buy more fun things.
But you only have this 1 dollar. Is this fair?

Minish thank you for your excellent analogy. Fritz Meyer

Avi Patel

February 27, 2013 at 12:05 am - Reply

Hi Minesh

Great post – I think inflation is a good topic for child to understand at a young age. The younger the better. You would need to get a child’s attention so you would need to use references to things that they like at their young age like toys, sweets or candy, ice creams, game stations ect…

You would need to explain that if they keep their money in a bank then then they would not be able to get many sweets/candy , toys, ice creams and game stations but if they grow their money by investing, then they can get many sweets/candy’s, toys, ice creams and game station for themselves and their good friends to enjoy together.

Hope you would agree

Regards
Avi Patel

randy julien

February 27, 2013 at 6:19 am - Reply

The best way I could think of breaking down the (Tag) gold, gold & silver, gold for life, inflation, minesh bhindi, silver, why invest in gold, why invest in silver(Tag) is an analogy a child could learn easily would be :

As playing the game-board called “trouble” maz 4 players and we finally are told that the game is rigged every time it is your turn when its time to push the bubble to see what number dice you rolled. No wonder the player across from you always ends up in first place.
Now for adults :
We are also playing there board game at there home. He did always say that seat was his lucky chair.

Note*- Any board game will do* This is great for the more competitive personality.
*the rigging represents the power someone has against you**Recognizing your being cheated represents to have the option from walking away from the game now you know its rigged.

Abs Haitham

February 27, 2013 at 11:23 am - Reply

One logical way to inter-connect what is inflation is to compare it with the purchasing power of one’s currency. Inflation is considered as a rise in the general level of prices of goods and services in an economy over a period of time. Purchasing power is known as the amount of goods or services that can be purchased with a unit of currency. Currency can be either a commodity money, like gold or silver, or fiat currency, or free-floating market-valued currency like US dollars or even £Sterling.The key to preserving your purchasing power and keeping on top of inflation is to use the most effective unit of currency against inflation. It has been proven that gold and silver have been more effective over the years in preserving one’s purchasing power than either $US or £ Sterling.

“Nothing is more difficult and therefore, more precious than to be able to decide” Napolean Bonaparte

Abs Haitham

February 27, 2013 at 11:28 am - Reply

One logical way to inter-connect what is inflation is to compare it with the purchasing power of one’s currency. Inflation is considered as a rise in the general level of prices of goods and services in an economy over a period of time. Purchasing power is known as the amount of goods or services that can be purchased with a unit of currency. Currency can be either a commodity money, like gold or silver, or fiat currency, or free-floating market-valued currency like US dollars or even £Sterling.The key to preserving your purchasing power and keeping on top of inflation is to use the most effective unit of currency against inflation. It has been proven that gold and silver have been more effective over the years in preserving one’s purchasing power than $ US or £ Sterling.
“Nothing is more difficult and therefore, more precious than to be able to decide” Napolean Bonaparte

Dipnarayan Singh

February 27, 2013 at 11:57 am - Reply

Hi Minesh,
Your question is good but answere defer for people to peole ?
Money is power i.e 2nd God.medical term “Vitamin-M. it ‘s my invention.Money is life saving drugs.more money more earning,good thinking best investment.poor men no money no investment and not a any idea mony earnig n better thinking .Rich people is alway’s rich.I’m poor man alway’s struggling education and money.

Andy Coates

February 27, 2013 at 12:26 pm - Reply

Right here goes,

To me inflation is like an invisible disease or a cancer that for as long as it can simply eats away at you without you knowing or to find out its just too late to do anything about it and because its hidden away or invisible if you will, then you / we don’t do anything about it, because how can we fix what we can’t see !

Which is just how the governments like it

“which governments” i hear you cry….. All governments is the answer as “They all piss in the same pot” just like all politicians do. (don’t get me started on politicians)

Anyway my analogy of money and where to save / invest it is like this

Having money in various places like Banks,Building societies or maybe an Isa or 2 is like
putting you money onto a train

(stay with me guys its does get better) now the bank is a red train the building society is a blue train and the Isa is a yellow train,

Now they all offer different benefits for your money right, however ALL the trains go where the tracks lead them and guess what, its the billionaires who built / laid the tracks that decides your final destination! , you just think you had a choice because of the color of the train you picked!!

Think about it were playing by other peoples rules and the cards are Always stacked in their favor, and always will be

I think we should wise up and lay down our own tracks!

As for inflation or what i like to call the “silent fiscal killer” or “financial cancer” or maybe something a bit less awful
oh i know …….”Legalized stealing”…… yeh that’s a good name for it

Because that is what it is like, for instance, if a year ago you had 50K sat in your bank (would be nice right) and you were thinking of buying a 5 series BMW, but you thought no i will wait a year until my wife retires then we will buy the car then take it on a road trip around France. nice idea right.

So a year goes by and you take out your money from the bank and the teller hands you £42.000 and you say hang on i had 50 k in there where’s the rest of my money? and the teller says that’s all your getting so please leave.
Then you would claim that you have been robbed right, and rightly so because you had !

However that’s not whats going to happen right, because you are going to be handed £50.000 and you stand there and count it out and all is well with the world right? WRONG!!

Because you take your lovely crisp 50 k down to your local BMW dealership and hand them over £44,000 pounds
and say i would like the black one please, remember the one i teat drove last August and the salesman says “yes i remember” however it will now cost you £49,995. , so you still get the car however your wife will have to make do with a trip down to Margate (and not around France) some may say that they would rather go to Margate , but that’s another story 🙂

The point is that in effect, that in real terms you have still been robbed, but legally robbed by that evil wrong do-oer (cue baddy music) “INFLATION”

joking aside, the outcome is still the same the spending power you had has just been lowered just as if you only have had 42k given by the bank teller

so you received £42,000 (in buying power) and was told its £50,000 (this trick would make Paul Daniels proud)
you might like it but “Not a lot”

So here’s the final bit

£100.00 = 10 £10.00 notes which = 10 pieces of paper with the queen on it and it buys 100 loafs of bread

Value a year later

£100.00 = 10 £10.00 notes which = 10 pieces of paper with the queen on it (so just like last year)

HOWEVER it will only buy 72 loaves of bread ! you see you been robbed (silently and legally)

That’s inflation for you

Right I’m off for a lie down after that

Andy

ILYNN ATKINSON

February 27, 2013 at 2:36 pm - Reply

Hello Minesh,
I was a high earner in my younger days and always had surplus cash so it was no struggle to learn the importance of inflation. I lived and worked in Central London and was au fait with both the property market and the stock exchange. If I left cash in my bank account it did not earn anything so I made sure that it was always invested either for capital gain or for interest. If a building society paid more interest than I would have to pay for an overdraft at the bank, then the money was immediately placed there, until there was sufficient accumulated for a deposit on my next large purchase (with mortgage or additional credit). When one pays lower interest for credit than the percentage of inflation on a particular asset, then buy on credit and the difference is a gift from Heaven. .The formula is simple. The art is in knowing what is increasing in value.

veronica brand

February 27, 2013 at 3:38 pm - Reply

I like to use the example of a food shop as most of us do this on a regular basis.

CASH SPENT COST IF SAME FOOD PURCHASED

MONTH 1 £100 £100
MONTH 6 £100 £105
MONTH 12 £100 £110
MONTH 18 £100 £115
MONTH 24 £100 £120

QUESTION:How much is your original £100 now worth if it now costs £120 to purchase the exact same items ?
Well its worth 20% less now so £80
Liken this to your savings
AMOUNT OF SAVINGS NOW WORTH
£100 £80
£1,000 £800
£10,000 £8,000
£100,000 £80,000

Obviously the above figures are for representative purposes only , to illustrate how inflation is devaluing your money.

veronica brand

February 27, 2013 at 3:40 pm - Reply

Bother when I submitted my answer it squashed the figures together and I had typed them out into columns..

Jennifer Rodriguez

February 27, 2013 at 6:34 pm - Reply

This is how I would explain it:
Imagine that you have a dollar. $1 = 100 candy bars. With your one dollar you have the ability to buy 100 hundred candy bars today. But the next day you wake up and suddenly $1 = 90 candy bars. In only 24 hours your ability to buy candy bars went down 10%. The price of the candy bar went up as well and now you can only buy 90 instead of 100 like yesterday.
The day after, you wake up and suddenly $1 = 50 candy bars! In only 48 hours, your ability to buy candy bars with one dollar went down 50%! The price of the candy bar shot up even more as well so with one dollar you can only buy half of what you were able to buy just 48 hours ago!
This is how inflation works. Your ability to buy more with your money (cash) goes down faster than your ability to make it.

Andrew Moore

February 27, 2013 at 8:06 pm - Reply

My wife came up to me and said Honey what is inflation??? I said well dear, remember when we were dating you were 36-24-36. Now 15 years later you are 40-42-48. There is Alot more of you but you are worth a hole lot less. Now I sleep in the garage

Tom

February 27, 2013 at 9:03 pm - Reply

Great post Minesh, I’ve learned so much about inflation and you have also scared the shit out of me. I think that’s the best way to teach inflation in a way to cause people to take action, you need to scare them a bit.

I guess a good way to describe inflation is you go to the bank and deposit $100. The same time next year you go back to the same bank, you draw out your $100 because your going to bu y a sweet inflatable pool with it (keeping with the inflation theme), you see the teller take the note out, you open your wallet with great anticipation, ready to take the 100 and slide it in, you reach out to grab your hard earned $100 and as you do, you realize the teller is leaving you hanging, you notice the teller takes out their pen, and they scribble out the 100s all over the note and write $96.40 on it! You now have to settle for a smaller, cheaper inflatable pool…

eggen

February 27, 2013 at 10:54 pm - Reply

Hello
There is a fire to extinguish it needs water, less water will have everything is slowly disappearing.
= Inflation made ​​by politicians and banks.
Citizens of the world wake up.
See you Sissi

brian zarb

February 28, 2013 at 3:25 am - Reply

If you could picture a GIANT ELEPHANT with the words INFLATION on it sucking 10% purchasing power from your total cash savings amount (equating to different amounts of dollars in different types of cash accounts,savings, 401k’s IRA’s, etc….) per year out of a hugh pitcher of water (this pitcher represents your purchasing power amount in currency) showing the water level going down future year by future year, you would once and for all understand the effects of inflation on any cash account you have. Then picture an image of the dream car (maybe a MERCEDS 560), you wanted to purchase with your original savings amount, now those same $$$ having the power to ONLY purchase an ACURA, HYUNDAI, or TOYOTA!! Minesh, i think it is important to create images/visualizations in people’s minds as most people are visual beings, with regard to the inflation process. Any person at any level of savings would fully comprehend a visualization/image when it comes to loosing an asset such as money in such a stealth type of way as is done by inflation!!

Glyn Williams

February 28, 2013 at 11:11 am - Reply

Hi Minesh thanks for another great post.

Start by imagining your savings are represented by a picture of an amazing cake (e.g. a wedding cake, retirement party cake – but choose a picture of a cake to present)

Every year inflation (a picture of a monster?) is eating some of your cake.
So we can use your real life example of 10%
Remove this slice from the cake in your picture.

After 7 years over half the cake has been eaten by the inflation monster (show the picture)

After 20 years you only have 12% of your cake remaining (is this your savings for the wedding you put aside at your child’s birth?) (not much cake to see in the picture now)

After 30 years (you may plan to live this long on a pension?) you have less than 5% of your cake left so I hope you had no plans to feed yourself from the cake as well as feed the inflation monster! (perhaps show a few crumbs a hungry pensioner with a small piece of cake and a fat well fed monster?)

Jenny

February 28, 2013 at 10:03 pm - Reply

Hi Minesh,
This how I would explain it to my children.

There is inflation and there is deflation.
Very simply, inflation is like blowing up as in a balloon and
deflation is how the balloon all the air comes rushing out. when you let go.

In our lives we buy things with our money that we have earned.
If you want a bike then we have to find out how much a new one costs.
Now bikes get better and better every year with lighter frames and lots of gears
that is they are made with better technology and materials.
But the cost is more each year as they develop better ways of making bikes.

So when I got a bike they cost about $50 for a top of the range bike and now
you want a bike they cost about $300. That is inflation – the price has gone up
over time. But you must remember that if we could put my new bike right next to your new bike yours is so much much better than mine.

Now let’s say you want ,instead of a bike, a new playstation.
There were no playstations when I was a kid so we can’t use that.
But we can look up on the internet how much they cost when they were first invented.
They were over $1000 for a new playstation. And that playstation was similiar to my bike –
it was top of the range for its time. There was nothing like in the shops. Someone had thought
of an idea and created the playstation as a fun toy.
So they were expensive because they were a new toy and there were not a lot of them.
Now today there are lots of different types of playstations and they play the most amazing brilliant
games and the pictures/graphics are so life-like. But, guess how much they are?
Around $300!
That is deflation. They get more and more cheaper to make because of the materials used
and the demand for them is very very high. So millions of them are made and because of that
they are cheaper to buy.

So, the materials used and demand for make things make things either go up in price or down.
That is inflation and deflation. To find out if your new thing you want is going to be more expensive or cheaper in the future see how much they were a few years ago.

Now when people start working, they put some of their money away each week so that when they stop working they have money to live with. But what they have to do is find a way to make the money they put away inflate and not deflate. They have to make their savings money work too and they need to invest in something that will help make their money grow into more money.
It is very important. Because if they don’t the money will naturally deflate like a blown up balloon.
You know how a balloon will slowly deflate if left alone – that is what happens to people’s savings.
What people must do is find a way of inflating their savings money so it is like one of those balloons that when you let go it floats up and up.

That would be the first lesson and I would leave them with the image of their balloon/money going up.

Owen

March 1, 2013 at 1:45 pm - Reply

Inflation to a child.

Ok, so Cake. Imagine the whole British economy (all the money). Everyone has a number of slices of the cake.

Let’s say you have 10 slices of cake, and you’re happy about this. One day someone comes and takes a corner off of each of your slices…not much, but enough that you slightly notice…. You still have 10 slices…. but not as much cake.

This keeps happening over the years… and eventually you realise that your 10 slices are so thin now that you will barely be able to eat anything.

Christine L.

March 1, 2013 at 9:58 pm - Reply

Think of every dollar you save as a cup of water. Your goal is to fill up a barrel of water by the time you are 65 years old. Problem is, there is a hole in the bottom of the barrel. So, every time you pour in a cup of water, it leaks out of the hole. The leaking out of the water is inflation.

We all know that we should put money aside for the future. For those of us disciplined to do so, it is critical to understand that for every dollar we save today, it will not truly be worth a “dollar” in the future because that dollar will no longer be able to buy us the same amount of “stuff” in the future. say you have a dollar today and with that dollar, you could purchase a candy bar. But instead, you forgo the candy bar and save that money in the bank. A year in the future, you still have that dollar in the bank, but you can no longer purchase that candy bar for one dollar. To get that candy bar, you now have to pay two dollars.

William Stewart

March 2, 2013 at 9:20 pm - Reply

A child could relate to a bag of M&M’s that has 300 pieces in it that sells for $5.00, .
in ten years that bag at the same price might only have 150 pieces.

The adult like you say still sees the $100,000 in the bank earning very little interest but he knows he has that money in the bank. The inflation of health care cost for retirement that today may be $250,000 in 10 years at a 8% historical inflation rate will be over $500,000.

Neither one see the yearly change as threating because they have their allowance or money in the bank that won’t be wiped out by a stock market crash.

Jim M

March 2, 2013 at 9:24 pm - Reply

Hi Minesh, “Inflation’ is the thing that is DEFLATING your personal income, cash reserves and pension on a constant basis, and the more inflation goes up, the less your income, savings and pensions can effectively BUY in real terms.

If there was no inflation, the value of your income and savings would be constant, and in 10 years you could buy what you are buying now, at the same prices as today.

With Gold and Silver increasing so much in value in the longer term, they provide the means to offset and even get the better of inflation by having you money in an asset form which not only retains its value but is increasing.

Jim

Marie

March 2, 2013 at 9:36 pm - Reply

***Inflation – a Cautionary Tale….or a Cocktail?***

GRANDFATHER WISE travelled many miles to visit his three teenage grandchildren.

As a parting gift, he gave each grandchild £1000 and said,

“Please invest this £1000 wisely, and in 10 years’ time, use the money earned as a means to visit your dear old Grandfather. I look forward to seeing you all in 10 years.

10 years later:

Grandchild 1: Had put the £1000 in a bank and earned a small amount of interest. In 10 years, the purchasing power of £1000 did not keep up with inflation, and so he was only able to purchase a bicycle to visit Grandfather Wise.

Grandfather Wise said to Grandchild 1. “Well, you didn’t have to work very hard to earn the bicycle, but neither did your money sitting in the bank!”
========================================================

Grandchild 2: Used the £1000 to buy a new interview suit and got a job. Over 10 years, was able to save £1706 and could afford to purchase a 10-year old car to visit Grandfather Wise. (According to ING Direct Consumer Savings Monitor, the average British person has £1706 in savings as of 3rd quarter 2012).

Grandfather Wise said to Grandchild 2: “Well, you certainly had to work very hard over 10 years to save up the money for this car…good to see you, and I’ll pay for your petrol, as I doubt you can afford to get home”.

===============================================================
Grandchild 3: Invested the £1000 in gold. Over 10 years, earned £14,000 (based on Minesh’s calculation) and decided to fly first-class to visit Grandfather Wise, and then flew the both of them to Fiji for a deluxe one-week holiday at a posh resort, where they drank lots of exotic cocktails on the beach, while watching magnificent sunsets together.

Grandfather Wise said to Grandchild 3:

“I’m impressed with your decision to invest the £1000 I gave you in gold. Another Rum Toddy, please.”

oriel

March 3, 2013 at 1:17 pm - Reply

Hi Minesh,

I think the answers you have given are best. To explain it to a child you have to pick something they like and want to buy. Like play station games for boys and barbie dolls for girls (ooh stereotypical! I hope I don’t get into trouble here).

Ok so I explained it like this to my 9 year old niece: (She’s into Barbie big time by the way).
“An example of inflation would be if you wanted to buy the latest Barbie doll from Toys R Us and it costs £15. You get £1 a week pocket money, how long would you need to save all your pocket money for to be able to buy the Barbie?” (she replied 15 weeks) “So after helping your mummy around the house to earn your pocket money, after 15 weeks you’d be able to ask your daddy to take you to Toys R Us to buy your Barbie?” ( Yes she replied). I asked her “how would you feel on your way to the shop to buy your Barbie?” (excited she replied) “So how would you feel if when you got there the price had gone up to £20? Would you be able to buy your Barbie? (No she wouldn’t and she’d be very upset) “What if you then went home, saved up your pocket money for another 5 weeks, when you had £20 you went back to Toys R Us to buy the Barbie but when you got there the Barbie was £22, it had gone up again and you still couldn’t buy it! What would you think? (that’s not fair she said, and being smart she said she’d go to another shop!). So I asked her “does the money you have to pay with for the Barbie doll look any different?” (no she said) “is it still £20” (yes she said). “But can it buy you the Barbie doll you want?” (no she said) “That’s why inflation is so clever and not fair – your money looks the same, it takes you the same amount of time to earn it but after a while, even though you can’t see anything different about it, you can’t buy what you want with it any more – you always need more of it!”

Just another way of saying the same thing 🙂
Oriel

Alex

March 3, 2013 at 8:04 pm - Reply

Inflation so vivid a child can get it.

Imagine our money as a stack of paper bills – for old times sake Pound notes. We put our money in a safe place to protect it so we can use it when we want to.

But the safe place has a problem; it is a hungry mouse who sneaks in and he eats one of our notes every day.

So we’ll find 7 notes gone every week.

So when we want to buy a new bike or trainers and we count our money before we go to the shop – we might not have enough because of the naughty mouse.

ザカリア アウディトレ

March 3, 2013 at 9:56 pm - Reply

Hello Minesh,
So one paragraph simple enough for a child? I’ll avoid childish metaphors because even kids tend to dislike them because they assume it’s too belittling. Here we go.

“People need to buy things so the big guys at the government print money and make it circulate. So what if for some reason, the big guys print more money than the people need?
There will be more money circulating than it should be and therefore people will be able to buy more things because everyone has more money, right? And then balance must be restored so everything becomes a bit more expensive naturally.
So how does it affect us? Simply put, where do we put our money savings? In the Bank. And as money can buy us less things because of Inflation, our money’s worth less because the market moved without it.
What’s the solution then? Invest in Mr Minesh’s course on how to buy Gold and Silver to protect your assests!”

Cheers,
ザカリア

jame green

March 4, 2013 at 12:10 am - Reply

Inflation represents value in terms of what you can actually buy with your money. Over time inflation reduces the value of your money. It is not related to the actual amount of money that you have but what you can get for it. Imagine a horse is twice the cost of a pony, always has been – always will be. In 1990 you bought a horse for $100 – today you could only buy a pony for that same $100. When inflation was very bad, in prewar Germany, workers got paid in cash and RAN to the shops to spend it before the value of their money decreased and they could buy less. This was high inflation, it was that bad. You need to protect yourself against it or see your savings disappear.

Richard Teare

March 4, 2013 at 12:11 am - Reply

I’ll tell this to my grandson:
Here is an old, crumpled, grimey £1 note worn and torn. No longer shiny, bright and new, it no longer buys the book you bought for £1 some years ago- that’s gone up in price because of inflation. Now, the gold coin I have here is the same age as the £1 note, but is still bright and shiny, not crumpled or old, and as it is made of gold (which we all know is scarce) it has gone up in value – and would buy several copies of the book, even though the book now costs more. Which will you rather have?

Undoubtedly I’d use a longer story, but you did ask for a paragraph, so I hope this does the trick!

brendan

March 4, 2013 at 5:23 am - Reply

Of yes, Inflation – the “The Silent Tax”. Simply put, inflation is a rise in prices relative to money available. In other words, you can get less for your money than you used to be able to get.

An increase in the cost of things that are necessary for humans to live and enjoy life, such as bread, butter, milk, cheese, coffee, oil, shelter, clothing, medical services, chicken, cotton, electronics, etc.” Or “a decrease in the value of money so that it takes more £s to buy the same goods and services it did in the past.

As the government increases the money supply by “printing” more of it inflation increases. The costs of good and services must increase because the suppliers costs have increased
So, if explaining this in terms a child would understand, lets pick an item that a child really appreciates. A McDonalds happy meal. 🙂

10 years ago that meal would have been priced at around £2. Now for the same meal it might be £3. That is an increase in cost of 50%!! You could have gotten another half a meal for the same price!

If you’re getting the same meal at a higher price, the price of the meal has not actually risen. Just the value of the £ has actually dropped. The meal is more expensive because of the rising costs of goods and services. As the cost of supplies goes up, McDonalds has to raise the cost of its meals (over time) to continue to make a profit. This is simply known as inflation.

For those with money in the “piggy” bank. If you have a few thousand £s in the bank this money will erode over time. Your money will really not grow sitting in the bank, but, the costs of all good and services that you use will. Look at all of your usual purchases. The McDonalds, the mars bars, groceries – they have all increased noticeably over the last 10 years. Has the money sitting in your bank done the same?

Joshua Curtis

March 4, 2013 at 9:22 am - Reply

The best example I’ve ever heard of inflation is the one you’ve just told with a Mars bar. To boil it down for kids, I’d just switch it to individual lollies – the little sort that come in a multi-pack.

I think 100 Mars bars would blow a kids mind – make it 100 lollies which can the be bundled in units (2 whole packs!) and you’ll have their attention.

Rita Gautam

March 4, 2013 at 9:22 am - Reply

Inflation is the scourge of our time! It basically means that even though the amount of money one has remains the same he or she finds it increasingly difficult to survive in light of increasing cost of goods and services that he or she avails. This so because the income remains the same but in REAL terms it buys less goods and services due to inflation. The same way money just sitting in a bank account erodes in value disproportinately and buys less and less!

Yinka

March 4, 2013 at 9:29 am - Reply

Inflation is a money eater. That’s how I explain it to my 4 year old. It eats your money a lttle bit each year, so if you do nothing, you’ll have nothing left. You have to beat the money eater!

cathi

March 4, 2013 at 9:34 am - Reply

Question 2

In year one you decide to emmigrate to Australia. By the time all the processes are in place, visas, passports etc youhave gone into year 2. You are about to leave when you realise you cant emmigrate and, you cant get out of this country because the value of what your saving would bring you in the new country aint going to buy you a heap of beans! You are trapped in a gylag called Poundland , sorry I mean Britain.

Les Hall

March 4, 2013 at 9:58 am - Reply

Inflation has affected all of us over the course of our lives and we can all relate to the general and ongoing increase in our cost of living whether it be the cost of our weekly shopping at the supermarket or the price of a new pair of shoes or a suit. The spending power of our money is diminishing constantly we have all seen that.
However what is happening now is much worse.
In a desperate effort to inject more money into the economy the government have decided to print more money! (in the form of quantitive easing).
Now we all know that can’t be right, you can’t create more wealth out of fresh air!
What this is having the effect of is devaluing our money we’ve saved on top of our inflation.
Think of the rising cost of crucial imports like oil for example, this not only has an impact at the pumps but it also radiates right through the economy as the costs of moving goods increases so do prices of all goods.
Don’t be fooled by low up front inflation forecasts and clever Government statistics, our money is being devalued faster than the Government lets on and the inflationary monster is growing and will continue to grow at an alarming pace!
The time for needing your money to grow faster has never been greater!

Dwight

March 4, 2013 at 10:06 am - Reply

25 years ago my Uncle gave me 50p to buy sweets.
I manage to buy enough sweets to share with 5 other kids, penny sweets, chocolates etc.
Today, I gave my kids a 50p piece, minted in the exact same year and asked them how far it could go on sweets. You can guess their answer.
The 50p piece has not change so what has?
The cost of sweets and everything in between.
So the longer they hold onto the 50p, the less sweets they can buy. The only answer is to make sure the 50p earns a few more pennies as time goes by.

Kyran

March 12, 2013 at 12:43 pm - Reply

Inflation is the broken mind, the broken reality, maybe it should be broken and will always be so, tho maybe we give inflation value like we give banks value like we give ourselves water and food, becuase we all created it. Tho we could say a cop is a good method, while a criminal is a bad method, but hey pay the criminal becuase he has no cash and pay the peaceful one beucase they have no cash, but really is the sky falling becuase of inflation and printing money, most people will marvel at you giving them priceless jewels and diamonds, rather than investing in gold and sivler, and if you can live with no money no job and no house and no friends and no bullets, and no guns then maybe the sky is falling for all of us.

nick

March 12, 2013 at 12:51 pm - Reply

I think a candy bar is a good example, people need to see they fuure personal loses, if you can call them that and even more need to see what their 10 pounds, €, dollars … will be worth in 2-3-4-10 years, but most importantly, they need to see a bullet prof plan that your strategy is working. We all know what money is and will be worth in time, what people need to know is a plan that will prevent that. Gold and silver are a sure think, the only one trough history as long as you have them with you – in personal possession, so called bank gold etc.., is same as shares they can sell it to everyone 45 times, and then you have to have a plan what happens after complete inflation, collapse of money, where to invest to trade the overpriced gold back to another trading unit….

David

March 12, 2013 at 2:02 pm - Reply

When I was a young man a gallon of gas was $0.15. I could fill my tank and get my girl a hershey bar for less than $5.00.

Fast foward 45 years and it cost well over $75.00 to fill a smaller gas tank and there is no moeny left over to buy my wife a candy bar at today’s gas prices ($3.699).

Gas is 25 time more expensive…

That’s price inflation.

I earned $1.75 per hour at my first job. I earned $300 per month or approximately $1.85/ hr during my service in the Air Force.

I earned 12.50 an hour during the 1970’s and $17.30 an hour in the 80’s at the same job.

That’s a 10 fold increase in wages…

That’s wage inflation.

The price of gas rose 2.5 times greater than my wages meaning that prices rose faster than earnings.

I used to wonder how come my father was able to provide so much for us on his salary and I couldn’t give my family half as much when I was making more than he ever did.

One day I plugged inflation into the picture an realized I would have to earn $250,000 to have the same purchasing power as my father’s $35,000.

THAT’S INFLATION…

As an aside, I think some readers have a misconception of deflation when they use examples of lowered prices due to technology and process imporvements. These are not deflationary, they are actually examples of wealth creation and unfortunately the government hides true inflation rates by including those very same examples (i.e. a tv costs the same or less and has more features thus, they say, the cost of living is going down).

Look at your daily/monthly expenses compared to the same expenses for years past and you’ll instantly recognize price inflation. Compare your salary or wage to years past (if in the same job/position) and you will clearly see your income has not risen in step with prices.

I have more money in the bank BUT, I can do less and less with it each year.

gouri

March 12, 2013 at 4:00 pm - Reply

Hi Minesh

I would explain the concept of inflation to my child in the following way:

If he/she has five dollars in his/her piggy bank, he/she can buy 4 candy bars at rate of 1.25$ each. But because the costs of goods always goes up due to various things like labor costs, high demand-low supply and other reasons, in next three years he or she may be able to buy maybe only 2 candy bars with $5. This decreasing purchasing power of money is called inflation. So in order to be able to buy 4 candy bars with the same $5 dollars he/she has, he/she has to buy something with it which will keep increasing in cash value at the same rate as the rate of inflation.
(For an adult crowd, you might even explain how the people are losing faith in the government to control prices and so they want to invest in something substantial like metals.) So gold prices go up with inflation and the decreasing confidence in government, so gold is good investment.
Now some people, even Susan Miller, the investment advisor believes that if you don’t know what to invest in hold back, that is let your wealth stay in the cash matrix. Because even though you are losing your purchasing power, you at least have some power left, instead of losing it all in some form of investment.
To address this dilemma, I think it is essential again to take a look at basics of wealth creation. Once people stand that investment is just another tool for wealth creation, they’ll also realize that there are certain times in the economic phases of the world wherein this tool will work the best. If that time is now, then they need to use this tool now. At some point in future, there might be another tool that will work best and it will be time to switch gears. Once you acknowledge this truth, I think your clients will also acknowledge it and be more open to the investment tool that you are offering.

Peter Wood

March 12, 2013 at 4:02 pm - Reply

Explaining inflation to a five-year-old

Little Emma’s granddad and grandma live 200 miles away. Every year Emma’s mummy and daddy take her by car to visit granddad and grandma for a fortnight’s holiday.

Daddy has £50 which he uses to buy petrol to put in the car to get them all the way to granddad and grandma’s house.

“Now, Emma, you do love to visit granddad and grandma every year don’t you?”

“Oh yes. I love it at granddad and grandma’s. We have such fun”.

“Well I’m so sorry to have to tell you this, but you won’t be able to go next year”.

“Why not?”

“Well, it’s because the price of the petrol keeps going up. Daddy only has £50 for petrol, which is enough to get you to granddad and grandma’s this year, but next year the petrol will cost more than £50, so Daddy won’t be able to buy enough petrol to get you there”.

(Emma starts to look tearful).

“But why can’t Daddy earn some more money to pay for the petrol?”

“Because the government won’t let him do that. He can only ever have £50. So next year you won’t be able to see granddad and grandma. In fact, I’m sorry to have to tell you this but you will NEVER be able to see granddad and grandma again”.

(Little Emma bursts into tears).

Aftab

March 12, 2013 at 6:18 pm - Reply

When relatives tell you that back in the day they could buy a pack of cigarettes(obviously now nicorette patch),pint of milk & mars bar for a fiver & still have a change they will soon enough struggle to buy a pint of milk for that let alone get any change, that’s inflation.(if you thing I exaggerate look at Germany in the not so distant past). So if you still want to be able to enjoy the odd cigarette, a glass of milk & a mars bar in the not so distant future better pull that cash out from under the mattress & look at silver & gold.

Bradley Black

March 12, 2013 at 6:34 pm - Reply

I would like to preface this by saying I would have this conversation at about 18 with my son or daughter.
This $20 is a lot like the your (or a young lady your age’s) sex appeal. Tonight, you can take it out and get drunk and laid by whomever you want…but as time goes on you will sober up to the idea of being very broke, because unfortunately neither one holds their value over time.

Adrian

March 12, 2013 at 8:08 pm - Reply

Hey son, you’ve just had your eighth birthday. When you were born your nanny put $100 in an envelope for you and set it aside so you could use it after you turned 8. That’s the good news. The bad news is this. You’re a big fan of building things with Lego. If you could have used that money the day your were born to buy Lego, you could have bought 10 full sets. Now because of a thing called inflation, you can only buy 4sets. It’s not fair and you’ve done nothing wrong but that’s what inflation does. The longer you hold on to that money, the less Lego you’ll be able to buy. Tough but valuable lesson!

Peggy Salvatore

March 12, 2013 at 11:19 pm - Reply

Money represents real productive value, and it is just a way for people to exchange their productivity for things they need. So, if Johnny works 8 hours at the grocery store and makes $80, he might only need $20 worth of groceries, so that leaves him $60 for other things like bus fare, shoes, and rent. With inflation, even though Johnny’s pay is still $80, the cost of the things he needs is going up. So, $20 of groceries 5 years ago bought him bread, eggs, milk, a pound of hamburger, a box of noodles, a can of coffee, a box of cereal and a jar of pasta sauce. Now, the $20 buys him a loaf of bread, a dozen eggs, a can of coffee and a pound of hamburger. (this is an actual example). He is still working for the same pay because the grocer also has to pay more for everything else so he can’t afford to give Johnny a raise, but the money he makes does not buy as much at the grocery store where he works. The other $60 for bus fare, shoes and rent also no longer completely covers those things because the cost of building the bus and putting fuel in it is greater so bus fare has risen, the cost of making shoes, transporting them to the store and paying for the clerks is higher, and the cost of taxes on the property and fuel for heat has also risen because those higher costs are working their way through the system and reaching everyone and everything. Pretty soon, the $80 no longer covers the cost of living, and so now it costs about $120 to get the same amount of groceries, same kind of shoes and same sort of apartment that you could get for $80 only five years ago. Your money is worth less because it buys less.

Peter-Andreas Zielinski

March 13, 2013 at 12:10 am - Reply

What is inflation?

Let me give you an example: The gouvernment meaning politician decide that everybody should have a house. But not every father or mother has a good job so that they can afford this house to improve the way of living of their family. That’s why the government starts to initiate a process in which the rates for credits are lowered so that every family can be happy. Now, everybody starts to buy a house and all the families are happy. But the banks which get the money from hard-working mothers and fathers act in a way which is for normal non-economics-persons or politicians invisible. They pretend to give the families a credit fond for low rates but in reality they know that the worth of money changes allways. Their are huge goveernment-independent banks which increase suddenly the rates for the credit. Mothers and fathers who work for example as teacher or nurse suddenly have to more even though the credit-giving bank has been pretending something different. Politician suddenly decide to save the mony of the nation. They pretend to garantuee that this is the best strategy in this situation. Mothers and fathers loose their jobs and they have to sell their houses. Kids become homeless. The banks become nervous and higher the rates. It like bubble which grows and grows and grows and suddenly it explodes because the banks and the politicans have made a mistake. Money becomes less worth so that you won’t have to pay 3 Dollar for one pizza, but maby 6 or seven Dollar.

Dale

March 13, 2013 at 3:46 am - Reply

In your Mars bar example you are comparing price per bar. You might get a more impressive number if you compared price per ounce. Back in the ’60’s before they raised the price for Snickers from 5 cents to 6 cents there was an interim where they first made the bars smaller, Later they like tripled the price but made a ‘super-sized’ bar, but the price per ounce still went up as well.

michael raeburn

March 13, 2013 at 5:33 am - Reply

Minesh what a great way to get this inflation thig over beleve me if I got it then every body must have powerfull stuff
many thanks

James

March 13, 2013 at 2:18 pm - Reply

Inflation is having a beautiful house on a cliff face. Everything looks bright and beautiful and the veiw is great but the foundations are getting washed away and weakened by the tide, wind and rain. And just when you want to relax after all the years of hard work and enjoy the sunset, the cliff crumbles, taking the house, the veiw and you with it.

Kim

March 13, 2013 at 2:25 pm - Reply

Hi Minesh,

This is how I recently explained it to my 10 years old nephew:

Well, let’s pretend that you’re not happy with the allowance that your parents give you. You don’t have enough money to buy all the bubble-gum, hamburgers, comics or toys that you want. Let’s also suppose that you had a Magic Machine that could print all the euros you wanted. (This is called “counterfeiting” and people go to jail for doing this. But just pretend that you could print as much money as you’d like.) Since you would have all the euros from this Magic Machine you could spend as much as you like and would not have to worry about asking your family for a bigger allowance. When you’re on a limited allowance you have to watch your pennies pretty carefully. But if you had a Magic Machine, you could be less careful with your euros. You wouldn’t have to choose between an iPhone or an iPad. You could buy both and even more! This would be fine and dandy for a time.

But suppose your friends all had these Magic Machines or that you had so many euros that you gave a lot of them to your friends. Well, if enough of you had loads of money to spend at the local candy store pretty soon something interesting would happen. The candy store owner has only a certain amount of bubblegum to sell. But suddenly, with you and other “rich” kids, there’s a big demand for bubblegum! If he had only 5 packages of gum for sale and there were ten of you who wanted to buy it, any one of you might be willing to pay €10.00 or more for one package of gum. (Remember that back when you had only your allowance, you’d never pay that much for a little pack of gum!) Because of the bigger demand, the owner of the candy store might decide to ask a higher price for the gum — and you will pay it because each of your euros has lost some of its value. You may seem “rich” but your money has lost a lot of its buying power because there are others who also have lots of money and are “rich.”

In very simple terms, this is what the government has done. Through many decisions made by the officials in the government, there has been an increase in the number of euros printed. There are just many more euros—paper euros that don’t buy as much as the old euros did. (I am European that’s why I used euros instead of dollars)

Lori

March 14, 2013 at 7:01 am - Reply

Inflation is when your allowance doesn’t buy as much as it did last year. For example, last year you could go to the movies, buy a medium popcorn and medium drink for $10. This year you can only afford a small drink and small popcorn at the movies with the same $10. You have several choices at this point. You can choose to downsize, see if mommy will give you a raise in your allowance, or find a way to earn some extra money.

Fabian

March 14, 2013 at 9:45 am - Reply

A king once gave 3 of his servants a gold coin each and requested them to use it until his return. Two of them started using the coins to try and increase its value because you could only buy ten chocolate bars which was also very expensive back then and they wanted to be able to buy 20 or more.However One of these servants did not use the coin. Out of fear he buried the coin in the ground trying to keep it safe until the king returned hoping he would not lose it. This was a vain hope because although they had no name for inflation back then it still existed in another form. The coin was a metal and in in burying it it was exposed to the elements and we all know that all metals even gold is eroded over time when exposed to the elements. Nothing can stop nature and erosion so in time the coin not only lost its shine and lustre but also some of its weight. This meant that although the servant could not see it his coin was losing its value gradually. This meant that after a year instead of being able to buy 10 bars of chocolate he could only buy 7/8 now although his coin still looked more or less the same after cleaning it. Leaving the coin where it was made it lose even more value after another year because the price of chocolate had also gone up so now he can only buy 4 bars with the same coin, even though the coin had not changed. If he had bought and planted corn or beans his coin would by now have increased in value because he would have had more than one coin by now and could have bought 50 bars of chocolate or more. If left in the ground longer/long enough the coin will eventually not be enough to even buy one bar of chocolate and this is how inflation works. Although your money looks the same every year inflation decreases its value consistently. If not applied properly to increase its buying power you will have less if it for your own use every year meaning with the same amount you will be able to buy less chocolates every year.

alan

March 14, 2013 at 6:59 pm - Reply

If a person is living on a fixed income ( like most people in the western world and especially so for the societies that promote socialist policies), we all have to be on a budget. This means that if we can only afford $20 for supper for a family of four, then we have to figure out how to economize and buy the best food possible to ensure that everyone in our family is as healthy as possible.

Lets say we were able to make a delicious pot pie that was 10 inches in circumference. This is about the size of a large dinner plate . We split the pie 4 ways and we ate our fill and were very happy. If inflation increases by 10% a year because we continually print more money because our government obligations are getting bigger and bigger, then things will cost at least 10% more per year . This means that with that same $20 we will still be able to make a pot pie but it will get smaller and smaller. It wont be long before we now have to divide a pie that is 8 inches or 6 inches in circumference. This would be the size of a saucer. Mom and Dad and the kids would be going to bed hungry. Hope for things to get better would get harder and harder.

Tarek

March 14, 2013 at 8:26 pm - Reply

“The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it… But though labour be the real measure of the exchangeable value of all commodities, it is not that by which their value is commonly estimated… Every commodity, besides, is more frequently exchanged for, and thereby compared with, other commodities than with labour.” – Adam Smith, The Wealth of Nations, 1776
George Washington was paid a salary of $25,000 a year from 1789 to 1797 as the first president of the United States. The current salary of the president has recently been doubled to $400,000, to go with a $50,000 expense account, a generous pension and several other benefits. Has the remuneration improved?Making a comparison using the CPI for 1790 shows that $25,000 corresponds to over $615,000 today, so the recent raise means current presidents have an equal command over consumer goods as the Father of the Country.When comparing Washington’s salary to an unskilled worker, or the measure of average income, GDP per capita, then the comparable numbers are $11 to $30 million. Granted that would not put him in the ranks of the top 25 executives today that make over $200 million. It would, however, be many times more than any elected official in executives today that make over $200 million. Finally, to show the “economic power” of his wage, we see that his salary as a share of GDP would rank him equivalent to $1.95 billion.

Mo

March 15, 2013 at 4:54 am - Reply

The concept of inflation can be understood like this: Money (Value) is like water. How you store it will determine how much of it you have. If you leave your money in the form of liquid (cash), and let it sit, it will evaporate over time. As time goes on, it will shrink and become less and less. If you store money in the form of ice (finite commodity such as gold) it will hold its shape and expand/grow. Ice can always be changed back into liquid. But once the liquid has evaporated, its gone.

Courtois

March 15, 2013 at 4:56 am - Reply

Inflation is: a)blowing up a water splash toy or b) letting the air out of the water splash toy? Actually, while we say “inflate” to blow it up, that is a good metaphor, as it’s only air, and as when the air is let our or leaks out eventually, it will deflate. Using the Mars bar is a genius stroke – in fact, imagine a genie blowing into your bank account and it’s inflating and inflating, but as with any water splash toy, it gets to a point and stops being able to accept more air. So it seems to stay ‘solid’ but we know it’s losing air all the time. And when you finally come out of the water after a few hours, it is almost collapsed to its original flatish shape. Yet while you were in the water it seemed “solid”. This is one way to view inflation.
A “why” you mentioned earlier – we are trained to learn things in certain ways. The school system is a classic example of an institution that will stay solid to ensure its ongoing livelihood – no questions. I saw this while in grad school in the U.S. – many professors, teachers and those dependent for livlihoods on the education system had a vested interest in keeping the same questions being funded and no answers being found…or the golden egg would dry up. Why has there been so much research on the “cure” for cancer rather than prevention? Why is so much research money going to drugs? In many cases, people’s livelihoods depend on this cycle – anytime you bemoan the “institutions” your neighbor is working in one to take care of his/her family.
Getting back to your question (!) I think children will understand the water toy metaphor – and even their parents. Stay with the MARS bar info, and espcially the lack of correct media coverage – that it IS NOT 2-3%. Thank you for that information – this day’s message alone is worth money for that perspective.

FS

March 21, 2013 at 9:08 pm - Reply

2ND QUESTION: How do YOU think we could explain the concept of Inflation powerfully enough in a paragraph so that a child could understand it? How could we explain it simply enough for someone with a few thousand dollars in the bank could GET IT and start taking the action to protect their wealth against this financial cancer & guarantee themselves a good life in the next 6-10 years.

When I was younger, my dad used to give me pocket money, £2 a week. I was able to buy a weekly comic/magazine and some sweets and save the rest.
He used to give to £2 a week for years, until I left home for university. I was no longer able to buy a magazine and sweets and have money left over every week. In fact I could now only afford this once a month, not once a week. That’s inflation. The sum of money stays the same over time, but its value, or buying power falls.

My mum is a smart lady. Over 30 years ago, she started buying gold jewellery and squirreled it away for her children, grandchildren and grandchildren yet to be born. A legacy, a wedding gift, if you will. She wasn’t rich, but she was able to afford the pieces at the time. Unfortunately, the house got burgled last year. The theives found and took all the gold. At todays prices, it was a sizeable hoard, worth a fortune, literally. The pair genuinely struck gold. Had it been the equivalent amount in cash, It would have been worth a lot less (in fact the insurance didn’t cover even half of it)

(thankfully, our most precious gems, mum and dad were out of the house at the time. 50 years of working hard, being smart – gone in 40 minutes 🙁 )

Karen

March 24, 2013 at 4:13 pm - Reply

If I look at a three year old child (who by the way ‘knows’ nothing’ about investing or the value of money-or taxes etc)…… I would say:
‘Look, what you have now and what can get you certain things that you like and need won’t be worth much soon as there are people who will take part of that away from you and there is noting that you can do about it. So you won’t be able to get what you need and like any longer from what you have now. But if you take what you have now, and put it into the right places (like silver and gold investing), it will secure what you have, no one will take it and it will make more if you have a little patience….’
(Then I would explain to my 3 year child what patience is on the example of nature, say feeding the ducks in the pond who are waiting patiently for us to throw the bred in…)

DUNCAN WALKER

March 25, 2013 at 2:10 pm - Reply

Inflation is the insidious thief that steals the spending power of your money without you even noticing it. People in Western Economies have been brainwashed to expect the cost of everything to increase every year, whether these increased costs are justified or not. Consumers receive a double whammy in that their income increases by less than the rate of inflation, but the tax brackets do not change and so they pay extra tax on the increased income, leaving them with less money available to buy the same things; which now cost even more. The hidden facet of inflation is that the size of products they buy decreases, while the price increases, meaning the cost per unit ( per kg, per litre etc) increases far in excess of the actual inflation rate. people with savings in the bank fare far worse. They receive 5% interest on their savings, but bank fees reduce this actual yield to around 2 %. The money decreases by about 4.5% due to inflation so in reality they lose at least 2.5% of their spending power each year.

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