Fisher's equation

Alright kiddo, Fisher's equation is a very important formula when it comes to understanding money and how it works.

Imagine you have some money saved up in your bank account. As time goes by, the value of that money will change because of something called inflation. Inflation is when things get more expensive over time, which means your money becomes worth less.

Now, Fisher's equation helps us figure out how much your money is worth with inflation taken into account. Basically, it says that the interest rate you earn on your money is equal to the sum of two things: the expected rate of inflation, and a little something called the "real interest rate".

The expected rate of inflation is how much prices are expected to go up over a certain amount of time, like a year. The real interest rate is how much extra money you earn on your savings account once you factor in inflation.

So, if you have a savings account that earns 2% interest and the expected rate of inflation is 1%, your real interest rate is only 1% because your money is basically only earning 1% more than the expected inflation rate.

Fisher's equation helps us understand how much our money is worth when inflation is a factor, which is really important for things like planning for retirement, investing, and just generally understanding how money works.