Have you ever thought about how much your money will be worth in the future? If you have Rs. 1 crore in your hand today, it might seem like a huge amount. But after 20 years, will that same Rs. 1 crore still feel big? The answer might surprise you.
In India, the average inflation rate is around 4% per year. This means the price of most things increases by about 4% every year, be it food, fuel, education, or healthcare. Over the long term, inflation eats into the value of your money. So, Rs. 1 crore after 20 years won’t have the same power as it has today.
How Inflation Reduces the Real Value of Your Money
Let’s understand this with a simple example. Imagine you have Rs. 1 crore today. If inflation continues at 4% per year, then after 20 years, the real value of that Rs. 1 crore will be around Rs. 50 lakh. In other words, what you can buy for Rs. 1 crore today will need around Rs. 2 crore after 20 years. That’s the power of inflation. It silently reduces the value of your savings.
So, if you are planning for retirement, your child’s education, or even a house, and you think Rs. 1 crore will be enough in the future, you may need to rethink.
How Much Will Things Cost After 20 Years?
Here’s how inflation changes your spending over time:
- Today’s spending: Rs. 1 crore
- Inflation rate: 4%
- Same spending after 20 years: Rs. 2.19 crore
Now, let’s look at daily expenses. Suppose your current monthly household budget is Rs. 50,000. After 20 years, you may need Rs. 1.1 lakh every month to maintain the same lifestyle.
So, whether it’s monthly groceries or long-term financial goals, inflation will affect everything. That’s why financial planning must consider future costs, not just today’s prices.
How to Protect Your Money from Losing Value
The best way to fight inflation is by investing smartly. One popular and effective way is through Systematic Investment Plans (SIPs) in mutual funds. SIPs help you grow your money steadily over time. But here too, you need to plan with inflation in mind.
Let’s say you want Rs. 1 crore after 20 years for your future needs. You decide to invest Rs. 10,000 per month through SIPs. Assuming an average return of 12% per year, your investment will grow to around Rs. 1 crore after 20 years, without considering inflation.
But here’s the catch:
If you factor in 4% annual inflation, the actual value of that Rs. 1 crore will be only Rs. 46 lakh in today’s terms.
So even after saving for 20 years, you will fall short of your target by more than 50% if you don’t plan for inflation.
What You Can Do to Beat Inflation in Your Investment Plan
If your financial goal is Rs. 1 crore in today’s value, and you want to reach it after 20 years, then you need to set a bigger target. You will likely need to accumulate more than Rs. 2 crore in future value to match today’s Rs. 1 crore.
To reach that bigger target, you can:
- Increase your SIP amount gradually every year
- Choose mutual funds with strong long-term returns
- Start investing early to take full advantage of compounding
- Recalculate your goal every few years as inflation and market conditions change
Smart financial planning is not just about saving money — it’s about saving money the right way by staying ahead of inflation.
Disclaimer: The inflation rate and mutual fund returns mentioned are estimates. Actual future values may vary depending on market performance and inflation trends. Always consult a financial advisor before making long-term investment decisions.
Source: Economic Times, Ministry of Finance
