What Does Purchasing Power Mean?

By Matthew Frankel, CFP – Updated Dec 18, 2025 at 1:40 AM EST

Key Points

Purchasing power refers to the quantity of goods or services $20 can buy today.
Inflation erodes purchasing power, making $10 buy fewer loaves of bread over 10 years.
Investing in S&P 500 funds can outpace inflation, enhancing future purchasing power.
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You may hear economists and commentators on financial news networks referring to the purchasing power of money. While it sounds like a pretty straightforward concept, there are actually some big economic and personal finance implications when it comes to how much purchasing power your money has.

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A shopping cart being pushed down a grocery store aisle. — Image source: Getty Images.

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Money

Anything that can serve as a store of value, unit of account, and medium of exchange qualifies as money or a form of currency.

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About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst and personal finance expert covering financial stocks, REITs, SPACs, and personal finance. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, The National Desk, and other TV networks and publications for his financial, stock market, and investing expertise.

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