One of the more familiar pieces of financial jargon is the word inflation, referring to the conditions under which prices and wages go up. Because of inflation there is usually also a reduction in purchasing power, as money is worth less, for instance if the price of a commodity doubles then the money you have is less potent to purchase that good.

Inflation can often lead to a reduction in savings because more money is being used to pay for things and there is therefore less money for saving.

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