Lesson 2 of 4 · 6 min read
Inflation: the silent enemy of money under the mattress
Inflation is why 10,000 RON today will not buy as much in 10 years. See how it is measured and why “safe” cash is actually risky in the long run.
Inflation is the general rise in prices across an economy over time. If last year a loaf of bread cost 5 RON and now it costs 5.30 RON, the price of that bread has risen by 6%. When this happens across the whole economy, we say annual inflation is about 6%.
In Romania, inflation is measured by INS (the National Institute of Statistics) through the consumer price index: a representative “basket” of goods and services (food, energy, rent, transport) whose value is tracked monthly.
Why it matters for your money
If you keep 10,000 RON (≈ €1,870) “under the mattress” or in a current account with no interest, and inflation is 6% a year, then after a year that money is the same nominal amount (still 10,000 RON (≈ €1,870)), but its purchasing power has fallen: you can buy with it what you could buy last year with about 9,400 RON (≈ €1,760). This is the loss of purchasing power, and it is invisible in the short term but devastating in the long term.
| Years | 10,000 RON (≈ €1,870) today, at average inflation of 5% a year |
|---|---|
| 5 years | ≈ 7,835 RON (≈ €1,470) of purchasing power |
| 10 years | ≈ 6,139 RON (≈ €1,150) of purchasing power |
| 20 years | ≈ 3,769 RON (≈ €706) of purchasing power |
Test it with your own figures
Use the Inflation simulator in the Calculators section to see exactly what a sum of yours would be worth in 5, 10 or 20 years, at different inflation rates.
What you can do
- Keep in cash or a current account only what you need in the short term (the emergency fund is a separate category, see Step 2).
- For money you won't need soon, look for instruments whose return beats inflation over the long term (we explain them neutrally, as education, in Step 5).
- Don't panic at monthly swings: inflation is read in yearly trends, not in one-month changes.
In short
- Inflation erodes the purchasing power of uninvested money over time.
- In Romania, inflation is measured monthly by INS.
- “Safe” cash is risky over the long term because of inflation: the risk doesn't disappear, it just changes shape.