You put $1,100 in your account and don't touch it for a year. You don't spend it, you don't invest it, you do nothing. Twelve months later you still have $1,100. And yet you don't have the same thing.
This is the idea that holds the whole module together: money is never still. Even if you do nothing, things happen to your money. And there are only three of them.
The three things that happen to your money:
- It loses value. Over time, the same amount buys fewer things.
- It creates value. In the right place, it produces more money on its own.
- It changes value. Some things go up and down in price constantly, and that swing is a force too.
Those three things have names: inflation, interest and volatility. They are three of the eight concepts in this module; the rest are there to help you understand them better.
You don't have to decide anything for them to act: they act anyway. The difference between knowing this and not knowing it isn't how much money you have, but whether what happens to your money is your decision or something you simply find out about.
Two people set aside $1,100 on the same day. One leaves it in a standard bank account; the other puts it in a product paying 3% a year. Neither touches it again. Ten years later they are nowhere near equal, and neither of them did anything in all that time.
We start with the first of the three: the one that acts on everyone and almost nobody notices. In the next lesson you will see how your money loses value: what inflation is.