INFLATION; the significant effect on the cost of living, the cost of doing business, and every other facet of the economy.

Based on the Philippine Statistics Authority as of 05 December 2017, the annual headline inflation at the national level slowed down to 3.3% percent in November 2017. Higher Annual Increment were noted in the indices of housing, water, electricity, gas, and other fuel; transport; recreation and culture; restaurant and miscellaneous goods and services.

Source: Philippine Statistics Authority,   https://psa.gov.ph/ 

So for the general public, what is inflation?

The value of your peso or dollar (or any unit of money) 20 years ago do not have the same value today. Why?  It's because of Inflation. 

Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly. (Note: Deflation is a contraction in the supply of circulated money within an economy, and therefore the opposite of inflation.) As a result of inflation, the purchasing power of a unit of currency falls. 

For example, if the inflation rate is 3%, then a pack of gummy bear that costs $1 in a given year will cost $1.03 the next year. As goods and services require more money to purchase, the implied value of that money falls.

So what causes the Inflation?

Some economists say that the most common cause of Inflation is the rapid wage increases or rising raw material prices.  Let us say a sharp rise in the price of imported oil, this rising energy prices caused the cost of producing and transporting goods to to also rise.

However, there is no single theory for the cause of inflation that is universally agreed upon by economists and academics, but there are a few hypotheses that are commonly held.

Demand-Pull Inflation – Inflation that is caused by the overall increase in demand for goods and services, which upsurge their prices. This theory can be summarized as "too much money chasing too few goods".  In other words, if demand is growing faster than supply, prices will increase. This usually occurs in rapidly growing economies. This theory is often promoted by the Keynesian school of economics.

Cost-Push Inflation – Inflation that is caused when companies' costs of production surge up. When this happens, they need to increase prices to maintain their profit margins. Increased costs can include things such as wages, taxes, or increased costs of natural resources or imports.

Monetary Inflation – Inflation that is caused by an oversupply of money in the economy. Just like any other commodity, the prices of things are determined by their supply and demand. If there is too much supply, the price of that thing goes down. If that thing is money, and too much supply of money makes its value go down, the result is that the prices of everything else priced in dollars must go up! This theory is often promoted by the “Monetarist” school of economics.

Practical implications on your MONEY.

Inflation is one of the primary reasons why people invest in the first place. Say for instance, with a 2% Inflation and a candy that cost Php 1.00 will cost Php 1.02 in a year. So assuming you just keep your money in your closet at home, your  Php 1,000 would be worth Php 903.92 after 5 years, and Php 817.07 after 10 years.

Bottom line, it is always better to put your money where it grows, either for protection against inflation or capital preservation.

Sources:

https://www.investopedia.com/terms/i/inflation.asp

http://www.bsp.gov.ph/

https://psa.gov.ph/

http://www.dti.gov.ph/resources/statistics/inflation-rate