The silent thief
The European Central Bank aims to keep inflation at 2% a year. Even that “healthy” inflation means prices roughly double every 35 years. At 3% a year, €10,000 under the mattress buys only about €7,440 worth of things after ten years.
Interest on interest
Compound interest means returns earn more returns. At first it looks like nothing – then the curve starts climbing. An example (illustrative, at a 7% average yearly return):
- €100 a month for 10 years: you put in €12,000 and have about €17,300.
- €100 a month for 20 years: you put in €24,000 and have about €52,100.
- €100 a month for 30 years: you put in €36,000 and have about €122,000.
The most important variable isn’t the amount. It’s time.
What to take from it
Returns aren’t guaranteed and investments go up and down – so invest only once you have an emergency fund and no costly debt, and only money you won’t need for years. Broad, low-cost investing and patience usually beat trying to time the market.
The calculators in Fiplo show how your own amount could grow – in nominal terms and in real terms after inflation.
The articles are educational and are not financial or investment advice.