How to Avoid Inflation

Inflation describes how the same number of dollars (or whatever currency) will buy less stuff in the future than it does at the current time. For example, $1 may have bought you a gallon of milk 30 years ago, but it no long does today. If you keep a pile of cash under your bed, you will not be able to buy as much in the future as you can now. So, you want to make sure that your savings do not lose buying power over time. Here's how.

	Make sure all your cash-like assets are held in some account that is bearing some form of interest. A savings account might be appropriate, or a CD might be appropriate.
	Make sure that you do not have too much cash. Cash, or savings, should be enough to cover emergencies and expenses that you expect in the next 5 years. If you have enough savings to cover emergencies and large purchases that you are saving for in the next 5 years, you should invest your money instead. Investments are things like growth stock mutual funds and real estate that go up in value and often provide cash flow as well.
	You can also buy US Government Treasury Inflation-Protected Securities (also known as TIPS). These items will give you exactly as much interest as the rate of inflation as measure by the Consumer Price Index (CPI).