The government puts inflation rate at 3.2% to 4.8% but in urban areas, that figure is about 6%.
Today, three meals cost about RM20 but in 20 years time - with an inflation rate of 6% a year - we will need RM63 per day for the three meals.
So while the RM500,000 in your EPF or bank account at retirement might look good on paper, if you do not invest that money to make it grow at a rate higher than the inflation rate, 20 years later, it would be worth only RM145,053 in purchasing power!
Reality hits when people find that they cannot afford to retire because they had not seriously put aside the money early on in life.
"It is more pleasurable to spend than to save"
People understand - at head level - the need to plan and save, but at heart level, emotions rule and instant satisfaction wins the battle.
A noticeable trend is that while the younger generation is prepared to invest in new financial instruments, the older generation gravitates towards fixed deposits. That is very risky because you would not be able to accumulate enough because the interest rates cannot meet the inflationary rate and your money is getting smaller.
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