Geoff from geoffmobile.com gives a short speech on the topic of “What is Inflation?”.

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Recorded at CTS Club Toastmasters.

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Geoff
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Understanding Inflation: A Simple Guide to Protecting Your Money

Have you ever noticed how that morning coffee that cost you $3 a few years ago now runs closer to $5? Or how the price of groceries seems to climb higher with each passing year? That’s inflation at work, and understanding it is crucial for protecting your financial future.

What Exactly Is Inflation?

At its core, inflation is the rise in prices across the economy over time. It’s that phenomenon we’ve all become uncomfortably familiar with—the fact that the same amount of money buys you less today than it did yesterday, last year, or a decade ago.

The most common way economists measure inflation is through the Consumer Price Index (CPI), which tracks the average price changes of a basket of goods and services that typical consumers buy. But here’s something interesting: inflation isn’t just one simple number.

Think of inflation as a spectrum of price changes across all products in the economy. While most things get more expensive, some actually become cheaper. Remember when flat-screen TVs first hit the market? A 40-inch model could set you back $4,000. Today, you can snag one for around $200. Technology advances at such a rapid pace that certain items buck the inflationary trend entirely.

What Causes Inflation?

Understanding what drives inflation helps demystify why your purchasing power seems to shrink over time. Let’s explore this with a thought experiment.

Imagine you’re selling a television on Facebook Marketplace for $500—a fair price based on current market conditions. Now, suppose the government suddenly gave every citizen a million dollars. You still have the same TV, but now everyone has significantly more money to spend. What happens to your asking price? It goes up, of course.

This illustrates a fundamental cause of inflation: when the money supply increases but the amount of available goods stays the same, prices rise. More dollars chasing the same number of products inevitably drives prices higher.

But inflation isn’t only about money supply. The supply side matters too. Consider what happens when factories shut down due to conflicts, natural disasters, or production issues. With fewer goods available but the same demand, prices climb. This is basic supply and demand economics in action—both sides of the equation can push prices upward.

Protecting Yourself Against Inflation

Here’s the uncomfortable truth: keeping all your money in a regular bank account is one of the worst financial decisions you can make. That $100 bill you tucked under your mattress 20 years ago? It can’t buy nearly as much today as it could back then. Cash sitting idle loses value over time as inflation erodes its purchasing power.

Start with Low-Risk Options

If you have money you won’t need within the next year, invest it. Don’t let the word “investment” scare you—there are extremely safe options available.

In the United States, look into Certificates of Deposit (CDs). In Canada, these are called Guaranteed Investment Certificates (GICs) or term deposits. These allow you to deposit money with your bank for a fixed period (typically one year) and earn a guaranteed interest rate. If you want flexibility, opt for a cashable version that lets you access your money anytime while still earning interest.

This strategy applies to everyone—individuals and businesses alike. That interest you earn helps offset the inflation eating away at your money’s value.

Consider Long-Term Growth

For money you won’t need for five, ten, or twenty years, consider investments with higher growth potential: stock portfolios, bonds, real estate, or even cryptocurrency like Bitcoin. These come with more risk but also offer greater potential returns that can outpace inflation significantly.

Don’t Forget Your Mortgage

If you own a home, one of the most cost-effective investments is simply making extra payments on your mortgage. By paying down your principal faster, you’ll pay less interest over the life of the loan—essentially earning a guaranteed return equal to your mortgage interest rate.

The Bottom Line

Inflation is an economic reality that affects everyone, everywhere. While you can’t stop prices from rising, you can protect yourself by understanding how inflation works and taking smart steps to preserve your wealth. The key is to keep your money working for you rather than letting it sit idle and lose value.

Whether you start with a simple GIC, explore mutual funds and ETFs, or make extra mortgage payments, the important thing is to take action. Your future self will thank you for not letting inflation silently erode your hard-earned money.

What steps are you taking to protect your finances against inflation? The best time to start was yesterday—the second-best time is today.