What Is Inflation?
Inflation means things generally become more expensive over time.
Your favourite snack
Your $2 hasn't disappeared — it simply doesn't buy as much as it used to.
Everyday examples
Why does inflation happen?
Prices can rise for many reasons — things becoming more expensive to produce, higher wages and costs, changes in supply and demand, or changes in the amount of money being spent. There isn't always one single cause.
Saving and inflation
If you save $100 as cash for many years, you'll still have $100. But if prices rise, that $100 may buy fewer things in the future. This is one reason people think about how to grow their money over the long term, rather than only saving it as cash.
Investing doesn't automatically beat inflation. Investments can still lose money.
5 items, then 5 items
Today, $10 buys 5 items. Later, those same 5 items cost $12. Has the $10 changed? Has what the $10 can buy changed?
The $10 itself hasn't changed — it's still $10. But what it can buy has changed: it used to buy 5 items, and now it can't quite afford all 5 anymore.
Use real-life examples when shopping — if your child notices something costs more than it used to, that's a natural moment to explain inflation. There's no need to introduce current inflation rates.
Where to next
More on investing and saving regularly.