# Purchasing Power

*Everyday Money — Finicade finance glossary*

Purchasing power is how much your money actually buys, as opposed to how large the number is. At 3% inflation, $100 buys what $97 bought a year ago, and over 25 years it loses roughly half its value. This is the concept that turns a 'safe' 1% savings account into a guaranteed loss when inflation runs at 3%, and the reason long-horizon money belongs in assets that grow rather than in cash that merely doesn't fall in nominal terms.

**Also known as:** buying power, real value of money

**Related terms:** [Inflation](https://finicade.com/glossary/inflation), [Real Wages](https://finicade.com/glossary/real-wages), [Cost of Living](https://finicade.com/glossary/cost-of-living), [Real Return](https://finicade.com/glossary/real-return), [Consumer Price Index (CPI)](https://finicade.com/glossary/cpi)

Source: https://finicade.com/glossary/purchasing-power