Inflation decreases the purchasing power of your money over time. For example, if you invest $10,000 in an asset that grows by 5% per year, in 10 years, you could have about $16,288. However, if the inflation rate is 3% per year, the real value of that money in today's terms is only about $12,000. This shows that while your investment amount increases, its purchasing power may not grow as much due to inflation.

Inflation is the rate at which the general level of prices for goods and services rises, leading to a decrease in purchasing power. When inflation is high, the same amount of money buys fewer goods and services than it did before.