Purchasing Power
How much a given amount of money can actually buy.
Purchasing power is what a dollar, pound, or Australian dollar is actually worth in terms of goods and services — not its face value. Inflation erodes purchasing power over time even when the number in an account stays flat or grows slowly, which is why long-term financial goals need to be measured in "real" terms, not just nominal dollars.
Worked Example
$50,000 sitting in cash for 20 years at 3% average inflation would only buy what about $27,700 buys today — the number didn't shrink, but what it can purchase did.
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