ELI5: Why does inflation happen?

Imagine you have a piggy bank. In it, you have enough money to buy 5 candy bars that cost $1 each.

Now, imagine everyone in your town suddenly gets given lots more money! They all have full piggy banks. Everyone wants candy bars!

But the candy store still only has the same number of candy bars.

Because everyone wants them so badly, the candy store owner thinks, "Hmm, I can charge more! People have more money now."

So, they raise the price of a candy bar to $2.

Now, even though you still have the same amount of money in your piggy bank, you can only buy two candy bars instead of five!

That's inflation!

It happens when:

• There's more money floating around (more in everyone's piggy banks). This is often because the government prints more money or makes it easier for banks to lend money.
• There's not enough stuff to buy (only a limited number of candy bars). This could be because of problems making things (like if the candy factory breaks down) or because more people suddenly want to buy the same thing.
• Because of these two things, prices go up. Your money doesn't buy as much as it used to. This means your money has less value.