One of the rarest Pokémon cards is the First Edition Shadowless Holographic Charizard. But why is this Pokémon so valuable? It’s rare. Imagine if you could buy one of these cards anywhere, it wouldn’t be rare or valuable.

It’s the same with money. When money is being printed and becoming less rare it results in inflation.

You’ve probably all heard your parents talking about inflation and rising prices but what is inflation?

Inflation occurs is when the price of goods and services becoming increasingly more expensive, increasing more than your rise in wages.

But why does inflation happen and what does it have to do with prices?

Let’s say I’m running for congress and I promise everyone more roads. To pay for the roads I either raise taxes or I print more money. I choose to print more money. As I do this I realize that inflation is rising. At this point I don’t know what to do because if I stop inflating the prices of everything, the country could go into a depression. So I keep inflating because inflation seems better than depression.

On the surface inflation seems like a good idea in that case, but when you dig deeper, it has dire consequences.

Why does inflation affect the value of money? If everyone wants holographic charizards then I’ll make a bunch more. Now everyone has holographic charizards! What I don’t understand is that the holographic charizard is valuable because of its rarity. Why are rocks worthless? Because anyone can get them. The easier something is to get, the less it is worth. The more money that is being printed, the easier it is to get money, and the less it will buy.

What does inflation have to do with prices? All prices are based on gain and profit. If it takes $5.30 to make something and you want to make one dollar off of each item you sell, then you have to sell it for at least $6.30 to make a profit off of the item. You paid $5.30 dollars to make the item, but you have $1.00 leftover. The leftover is a gain. You made $1.00.

Now, let’s say that money is easier to get and its value is $.30 less than it was last year. Then the price to make the item rises to $5.60. You have to raise the price to $6.60 to earn the same amount you did one year ago. With so much money being made, the value of the money is falling rapidly.

In 2000, the dollar was much more valuable. One hundred dollars could purchase you the equivalent of $164.75 today. In 22 years the dollar has lost almost 40% of its value due to inflation. Prices have risen 64.76%. In 2000, gas prices were as low as $1.30 per gallon but now they are as high as (and higher) than $4.59 per gallon. In 22 years we have had a 65% increase in inflation (in terms of $100).

We are actually not in the midst of our highest inflation in U.S. history. The highest inflation in our country’s history was in 1778, followed by 1863. Inflation was far higher in 1980 than it is now.

Inflation affects us in many ways. As prices rise, we and our families must be more careful with how we spend our money. We learn to better steward what we have and make it stretch. This may mean that we may need to give up small luxuries.

Inflation can affect our lives, but if we are wise and careful with our money, it isn’t something to fear.