Inflation – What it really is and what do you really know about it?

 

If I were to ask you a question – what does inflation mean to you? Or explain ‘what is inflation’?

What would your answer be?

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Got an answer?

 

 

Some of us may encounter some form of difficulty in trying to articulate what inflation really is.

 

Some of us may explain it as the same dollar today cannot buy the same amount / quantity of things in the future.

Some of us may answer it as it’s the value of money getting smaller.

My favourite answer when I asked the older generation this question and they would tell me – Last time (long time ago) I go market with two red colour notes, now I go market with one big blue colour note, come back wallet empty, basket also not full.

 

It’s not that we do not know what inflation is, but all of us have slightly different ideas about inflation. And guess what? Everyone is right.

 

But just to keep things simple for everyone, I’ll just share my brother’s answer. I like his answer, simple yet easy enough to understand.

And his answer is, the cost of goods has risen.

 

And I’ll further illustrate on his answer and ask so how much has the cost of goods really risen? Is it really the 4-5% that we have been hearing?

 

Channel 8 news just reported that some coffee shops in Singapore have increased the prices of coffee and tea, due to rising rental and manpower costs. One-third of 1,200 coffee shops have increased the price by 30 cents.

A cup of coffee generally costs $1.00. A price increase of 30 cents works out to be a 30% price increase!

One of the causes highlighted leading to this increase is due to landlords increasing rental by 10 to 20%. I’ll repeat, 10% to 20%.

 

I recalled about 30 years ago when my parents first bought their 5-room HDB flat, they have gotten it for $90k. For some who got their flats earlier, the price could be lesser. But for us to own a 5-room HDB now, on average, we could be looking at a price tag of about $400k, depending on location. This is a 400% price increased over a 30-year period.

 

Movie tickets in the past some 30 years ago cost about $1. A movie ticket cost about $6 about 20 years ago. Now? On average, a ticket cost about $9 to $11 depending on the day and mode of buying/booking. It’s about 50% increase from 20 years ago if we take the cheapest ticket or about 900% increase from 30 years ago.

 

 

If the above examples are not enough to set you thinking what the cost of inflation really is, let me share this article from goodyfeed , which I think illustrates the % of inflation very well.

The article is about the price difference of foods/drinks in primary school canteens in 1990s as compared to 2010s. You can read the full article here.

The price increase had ranged from 100% to a staggering 1000%. Fortunately, for most of the food items, the prices had increased by approximately 1-fold or 100% (which is the lower end range) over a 20-year period. But still, can you imagine our food costing twice as much 20 years down the road? Would we still afford to have our comfort food like a bowl of wanton mee by then?

 

I hope the above examples paint a clearer picture how a simple 4-5% inflation every year accumulated can make a big difference over 20 or 30 years, resulting in prices to cost about double in time to come.

 

No wonder this explains why the older folks would tell me, last time they could buy one basketful of groceries with $20 but now even with $50, they cannot even fill the basket.

 

About Gwen

Business Owner, Investor. Financial Guru, Educator. My passion is in business management, financial matters and education. Combining these favourites, I manage this blog to share the importance of money protection and growth. Today, I invest in business, stocks, forex and properties. Collectively, I own two overseas properties, a commercial and an industrial property in Singapore. Update: I've since sold my industrial property for a small profit. Have a question? Email me at gwenkok@moremorecash.com
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One Response to Inflation – What it really is and what do you really know about it?

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