Lock ₹20,000 away

Watch the drawer.

You save ₹20,000 and keep it at home as cash. Nobody spends it, loses it or lends it.

Ten years later the drawer opens. The note is exactly the same: **₹20,000**. Nothing inside the drawer changed. The question is what changed **outside** it.

Meanwhile, at the shop

Drag through the years.

While the note sat still, prices kept rising. Here they rise **8% a year**. Each tile is a tenth of the shopping the note bought in year 0.

**Remember:** the note didn't shrink. The prices grew.

This has a name: inflation

Tap through the four views.

**Inflation** means prices **in general** keep rising, **year after year**. Each part of that matters.

Two things decide the damage

Pick a speed, then drag the years.

How much the cash loses depends on **how fast** prices rise and **how long** it sits.

**Remember:** a small-looking rate does big damage when it has enough years.

A saver's plan

Drag through each year of retirement, or press Play.

A saver earns ₹50,000 a month, spends ₹30,000 and keeps ₹20,000 as cash, for 20 years. Costs rise 8% a year. At 50 they stop working.

Example figures, worked out year by year from the assumptions above.

Why nobody notices

Switch between how it feels and what it buys.

We judge money by its **number**, not by what it buys. This is called the **money illusion**.

**Remember:** judge money by what it buys, not by its number.

Prices can fall too

Move along the years.

Prices don't only go up. In the US from 1920 to 1935, prices **fell** by about a third, and the same cash bought **more**.

US consumer prices, 1915 to 1935. History shows rising prices far more often than falling ones.

When does cash make sense?

Switch between the two jobs.

The same cash, two different jobs. Time is what changes the answer.

Check — Question 3 of 4

Put each one where it belongs.

What you now know

• Cash keeps its number. What it buys moves with prices.
• Inflation is prices in general rising, year after year.
• The loss depends on how fast prices rise and how long the cash sits.
• Prices can fall too, and then cash buys more.
• Judge money by what it buys, not by its number.
• Cash suits money you need soon. It is costly for money that sits for years.