Inflation is the price increase of goods and services over time resulting to decrease in one's purchasing power. Inflation is a major factor t o consider when you build up your financial future. 

       Inflation decreases your purchasing power. 
       For example, just a few years ago, you can buy 2 movie tickets for only Php200. Years later, because of inflation, that same Php200 can only buy 1 movie ticket.

      Inflation also decreases the real value of your money. 
       For example, if the inflation rate is at 3%, the real value of your Php100 today will only be Php97 next year. After 10 years, its real value is only Php74.41.
       It means that if you put your money in an account with zero rate of return, you will lose your money in the long run. When saving your money, it's important to take inflation into consideration. The rate of return of your money should beat inflation and taxes. 

     There's a right way to save and the wrong way to save. 

The Right Way to Save 

         Saving money is important, but it's not enough. You need to save money and save the right way. 
First, you need to save regularly. Have the discipline to save consistently and regularly. 
         Second, your saving rate of return must beat inflation and taxes because you can be saving and still losing money if your rate of return is lower than inflation.

         Let's say you save Php10,000 and the bank gave you 3% interest. If the inflation rate is 3.5% and the tax rate is 20%, it means you are saving the wrong way because you are saving below inflation and losing money. 

Here's a sample computation

EXAMPLE 1:

If you save:                           Php 10,000
at 3% rate:                            Php 300
Less 20% Tax:                      Php 60
Net after Tax                       Php 10,240
Less 3.5% Inflation:            Php 350
Actual Return                     Php 9,890 YOU LOSE

EXAMPLE 2

If you save                            Php 10,000
at 5% interest:                     Php 500
Less 20% tax:                       Php 100
Net After Tax:                      Php 10,400
Less 3.5% Inflation             Php 350
Actual Return                     Php 10,050

You must get about 5% or more interest to beat taxes and inflation