Store of wealth refers to the ability of an asset to preserve its value over time. Money, property, and gold are examples. When we save these assets, we can transfer our current wealth to the future. They contrast to perishable goods, which are a poor store of value because of the tendency for spoilage.
Money as a store of wealth
Money is significant in the modern economy and overcomes the barter system, which is very troublesome. Money serves four essential functions:
- Unit of account
- Value store
- Medium of exchange
- Deferred payment standards
Money functions as a store of value or wealth, which means you can not only use it for today’s transactions but also save it for future use. By saving, you hope to use it to buy more goods in the future.
But, unlike gold, money is vulnerable to inflation. When the price of goods rises sharply, the value of money goes down. Conversely, gold is not susceptible to inflation, and we consider it always valuable over time, whether we have a lot of money or not. For this reason, gold is regarded as a safe asset, even when hyperinflation occurs.
