The scary story of inflation!

2015-10-21 07:27

There's a lot of debate about what the actual inflation figure is. Officially, it's somewhere between 4.5 - 6%. But the volume of purchases in my shopping trolley vs. its cost seems to tell another story...

However let's take 6% as the right figure. I invested R200 000 in RSA Retail Savings Bonds over a 3-year period at 7.75% return. (That's what it was then.)

Anyway, using my trusty calculator, I did some maths. R200 000 x 7.75%+ = R215 500. Times 7.75%+ again = R232201.25. And once more for the 3rd year = R250 196.84 to withdraw. Whoopeee!! A whole fifty-grand profit on my original investment!

But now comes the sobering part. I then did the calc of taking inflation over the 3 year period into account. R250 196.84 x 6% minus = R235 185.03.  Again, for the second year x 6% minus = R221073.93. And finally for the 3rd year when I get to draw it, the real-world figure works out at R207 809.50 in terms of the actual amount of the value it was when I deposited it  Wow! A whopping whole R7809 increase in ACTUAL VALUE ON MY R200 000 OVER 3 YEARS! Not the glorious R50 thousand 'profit' I thought I would be getting. Not so whooopeee then...

(And banks normally give you a far lower rate than 7.75%, or 8.25% as the 3-year RSA Bonds are now).

Scary stuff inflation, isn't it?


Inside News24

Lockdown For
Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire network.