What Is Inflation?

Inflation is the rate at which the general price level of goods and services rises over time. When inflation goes up, each dollar you have buys less. The US Federal Reserve targets about 2% annual inflation, but actual rates vary year to year.

Historical US Inflation Rates

  • 1970s: 7-13% (oil crisis, stagflation)
  • 1980s-1990s: 3-5% (gradual decline)
  • 2000s-2010s: 1-3% (low and stable)
  • 2021-2022: 7-9% (post-pandemic surge)
  • 2023-2025: 3-4% (cooling but above target)

How to Protect Your Money from Inflation

  • Invest in stocks – Historically return 7-10% annually, beating inflation
  • Consider I-Bonds – US Treasury bonds that adjust for inflation automatically
  • Real estate – Property values and rents tend to rise with inflation
  • Avoid holding too much cash – Savings accounts often pay less than inflation
  • Negotiate salary increases – Your income should at least keep up with inflation

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