L1 · Starter: How Markets Work / Money Basics
X0003
Inflation Explained: Why ₹100 Buys Less Every Year
You hide ₹1,00,000 in a cupboard for 10 years. Not one rupee goes missing. So why can it buy so much less?
Inflation means prices go up every year, so the same money buys less.
The story
Sunday morning. Arjun is helping his mother clean an old cupboard and finds an envelope of cash.
Arjun: Meera! Amma kept ₹10,000 in here ten years ago. Not one note is missing!
Meera: Lucky. What did a plate of samosas cost back then?
Arjun: Hmm… maybe half of today's price?
Meera: So how many plates can that ₹10,000 buy today, compared with back then?
Arjun: Wait… a lot fewer. The notes are the same, but they buy less.
Meera: That's inflation. Prices creep up a little every year. Nobody steals your money. It just shrinks quietly.
Arjun: How fast does it shrink?
Meera: If prices rise 6% a year, something that costs ₹100 today costs about ₹179 in ten years.
Arjun: So the cupboard is actually… losing money?
Meera: Every single year. The question is: how do you beat it? Try the lab first.
What you just saw
The blue line is the number in your cupboard. It stays flat.
The gold line is what that money can really buy. It slides down every single year.
That gap is the hidden cost of keeping money idle. It is why people invest: to grow faster than prices.
If your money grows slower than prices, you are losing, even when the number stays the same.
Practise it in the Compounding & money.