How much it will cost to buy a car and send kids to school in 20 years time.
Category Finance
Old Mutual’s latest Long-term Perspective report for 2017 highlights how inflation will impact the cost of buying a car, getting healthcare and sending a child to school over the next 10 and 25 years.
The report described inflation as ‘South African enemy number one’, as it eats into any attempts for the general public to save money – which affects everything from the spending power of the money you have, to the real value of the money you put away for retirement or that ‘rainy day’.
It is also incredibly difficult to track, with even government’s target inflation rates not painting the whole picture for everyone in the country.
“Despite the fact that SA’s inflation measurement and calculation is among the best in the world, it is an average of all the consumers in the country,” Old Mutual said.
“If your expenditure is more skewed towards components in the basket of goods with very high inflation rates (for instance, education and healthcare), you will experience a much higher personal inflation rate than the country average. In this case you will need to save more for future expenses.”
Taking into account historic inflation, 10 years ago, South Africans would have paid almost half of what it costs today for a R1,000 basket of consumer goods.
Twenty years ago it would have cost R292 to fill a trolley, compared with the mere R5 of 80 years ago.
Looking ahead, taking the average inflation rates in the respective categories over the past few decades, Old Mutual painted a picture of how much consumers could expect to pay for a vehicle, a year of tuition at a private school and the cost of a hospital stay 10 and 25 years from now.
Most importantly, however, Old Mutual warned that inflation will have a massively detrimental affect on your retirement savings.
“If your retirement income does not at least grow in line with inflation, you will either experience a decline in your standard of living or you will run out of money,” the group said.
At a 6% inflation rate, for example, a fixed monthly retirement income of R10,000 a month today will decline in real terms to about R1,700 a month after 30 years.
Author: Businesstech
