Glossary term

Purchasing Power

How much goods and services your money can buy.

Purchasing power is the real value of money. A bank balance can look stable in nominal terms while losing purchasing power if prices, rents, food, energy, or taxes rise faster than the return earned on cash.

Example: A $100,000 cash balance loses real value if the cost of living rises faster than the interest paid on that cash.

Where this appears

Why retail investors need to learn how to manage money