Inflation, is it your friend or your worst enemy? Inflation is the rise in the level of prices over time. Thus when your grandparents say that everything is getting so expensive, they are right, at least from one aspect. What was priced at 1 USD 50 years ago is probably priced about 10 times as high today. But even though everything is becoming more expensive, your salary follows the CPI by yearly adjustments, so it's not really more costly to live today than 50 years ago.

Inflation is important. For example, if you take a loan, that loan will decrease automatically with inflation. The bank adjusts for this, of course, by setting an interest rate on your loan. But consider the opposite, what if the inflation was negative. That would never be adjusted by the bank and then the loan would actually increase over time. Then no one, person or company, would take a loan to invest in new machinery and the economy would as a result slow down and possibly come to a stand still. Therefore we depend on inflation to feed progress.

But the inflation can also work against you if you have all your savings in investments that do not adjust for inflation, for example if you invest in your mattress. All those investments will decrease over time with inflation. The stock market is automatically inflation adjusted since it is liquid. Your savings account is also inflation adjusted, but since the bank is in the business to make money, keep an eye on the real inflation rate and the savings account rate. As they may be close to each other it might be time to find new investments.

Today I have made an inflation calculator public on this site. It is available at this link. Go ahead, your 1000 SEK purchase in 1950, how much would you need to pay today? Or, find out if your year 2000 investment of 10000 has beaten inflation (inflation puts it at 11494 today).