Inflation

Inflation is when the prices of everyday things—groceries, gas, rent—go up over time, so your money buys less than it used to. You'll hear about it constantly in financial news because it directly affects your purchasing power and how much your savings are actually worth. When inflation is high, a dollar today might only buy what 90 cents bought last year. It matters to stock investors because companies with pricing power (ability to raise prices without losing customers) often do well during inflation, while savers holding cash lose out. For example, if inflation hits 5% annually and your savings account earns 1%, you're effectively losing money in real terms.