Do you have any idea how much a $100 bill will buy you in 40 years? Did you know that it will buy you less than what it does today? I hope so, because without realizing this, you could have a very dismal retirement.
The Average Inflation Rate of the United States
According to Trading Economics, the average inflation rate over the past 100 years has been 3.38%. Most likely, this will be the trend for the future as well. So, what does this mean for your money today? How will it affect your future?
Before we get into what $100 can buy you in the future, let’s take a look at what it can buy us right now. According to the latest Target ad, here’s what that $100 bill can get you today:
- 40 gallons of milk
- 5 hoodies
- 2 pairs of shoes (keep in mind, these aren’t Air Jordans)
- 30 boxes of cereal
$100 in the Future
Let’s say you put $100 in a savings account that paid 0.00% interest (there actually are some of these out there – please avoid them) and then took it out 40 years from now to buy a few essentials.
In 40 years, that $100 will buy you…
- 10 gallons of milk
- 1.25 hoodies
- 0.5 pairs of shoes
- 7 boxes of cereal
Wow! That really sucks, huh? Think about it though, if you choose not to invest your current earnings, this is what will be happening in your retirement years. Your hard-earned money will only buy you one shoe in the future (last I checked, most of us need 2 of those….)!!
What About an Inheritance?
If you’re anything like me, you’d like to leave an inheritance for your next generation. Since I’m only 26 years old, I most likely won’t kick the bucket for another 60 years. What will my $100 buy my kids and grandkids?
- 5 gallons of milk
- 0.67 hoodies
- 0.27 pairs of shoes
- 4 boxes of cereal
Yep, that’s a pretty sad inheritance. It’s no wonder why old people think that a shiny new quarter is so valuable! Back when they were kids, this probably could have bought them 10 candy bars!
Make Sure That You’re Earning Interest on Your Money
I hope that this quick lesson has taught you something about what could happen to your money in the future. If you don’t earn at least 3.5% on your money each year, you’re actually going backwards!
Are you surprised how little $100 will buy you in 40 years? What are you doing to grow your current savings?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.