Lesson 3 of 3 · 6 min
Real returns, and the most dangerous word
What is left of a return once inflation and tax have taken their share, and why 'guaranteed' next to a market return is the surest scam marker there is.
The rate on the poster is the nominal return. What your money can actually buy afterwards is the real return: what remains after inflation, and after tax on the interest or gains.
A deposit paying 7% while prices rise 6% grows your purchasing power by barely 1% — and after tax on that interest, possibly nothing at all. Nominal numbers flatter; real numbers tell the truth.
Your turn
An investment returns 8% in a year while inflation is 6%. Approximately what is the real return, in percent?
Work it out yourself
Take any rate you have been offered — a deposit, a scheme, anything — and enter it with your own inflation estimate and tax rate. The number that comes out is the one that was true all along.
Real Return Calculator (post-tax, post-inflation)Spot the scam · WhatsApp
The message that finds everyone eventually
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Quick check
A deposit pays a rate that is genuinely fixed for its full term. What can still make you end up poorer in buying power?
Check yourself
1 / 3
Kabir asks
A deposit pays 7% while prices rise 6%. Before any tax, what has happened to your buying power?
Done reading?
Saved in this browser — and finishes the course.