we had sorta a lecture on savings today

in sum, we were told that

saving up yur money in the bank is good, cos money has greater value over time

er

being an Econs student, i'd beg to differ!!

you see, in Singapore, there's such thing as inflation.

as if u din know, Singapore has a annual inflation rate of, er, 3% or something.

overall, low inflation is good, but that's econs

u see, inflation means the price of goods and services rise.

so the real value of yur money falls

i remember during my Primary school days, a stick of Mentos costs $0.60 at the mama shop.

Now, even at the supermarket, it costs $0.80 cents.

If i had $1000 dollar then, i could buy 1666.666666666666 sticks of mentos.

the crux of the problem lies in the nx sentence

where on earth(in Singapore) can u find a bank that gives u 10% interest rates per year?

but that's what it was claimed to be

my parents say, fixed deposit at Standard Chartered only gives 1.88% interest rates!

and savings account is less than 1% -_-

Assuming that my calculations are correct, a quick count of $1000 in a savings account over a period of 7 years(from primary school until JC2) with compound interest 1% would give me

$1072.13

Alright even if i placed it in a fixed deposit account, i would get

$1139.25

so now, due to inflating prices, I can only buy 1424 sticks of mentos!!

that's a loss of 242 sticks of mentos !! =O

No wonder people were complaining about the rising costs of living

I mean, there wouldn't be a problem if the gains from interest rates could offset the loss in the value of money due to inflation

er, is that too hard to understand

anyway, the net effect is that the value of yur money has fallen sia

but, well, he's right that saving up is good

cos if you don't, the value of yur money falls even more

so what point i am trying to prove here?

nothing actually

im juz correct his mistake

-_-"