In recent months, more Americans than usual have used their savings to cover mounting expenses. The recent inflation spike surprised most people, including many economic professionals. Meanwhile, the shock of rising costs has been felt widely. It can be particularly problematic in the long run when it starts to reduce your future purchasing power. Your finances could suffer if you fail to factor in inflation in your long-term planning. This article at Forbes by Natalie Campisi discusses how inflation is eating into people’s savings.
Inflation Is at The Highest Known Levels
During the pandemic, Americans amassed an additional $2.5 trillion in savings. However, that money is rapidly running out as people use their cash reserves to combat the greatest inflation in more than 40 years. A recent Forbes Advisor survey found that two-thirds of Americans said they are using their savings to offset rising prices for goods and services.
According to a recent government inflation measurement, consumer prices rose 8.6% from a year earlier in May, which is the highest yearly increase since 1981. Inflation-adjusted real wages fell by 3.0% between May 2021 and May 2022. Resulting in a wider disparity between earnings and the price of goods and services.
In addition, consumer debt is increasing, with a $266 billion increase from the fourth quarter of 2021 to the first quarter of 2022 alone.
Who Is Spending More of Their Savings? Older or Younger?
According to the survey, 67% of Americans said they’ve been spending their money to deal with rising prices:
- 8% of people have exhausted all their savings.
- 23% of those who had saved money have used most of it.
- 36% of people have made small withdrawals from their funds.
All ages report using up their savings due to inflation. Although, older respondents are likely to have kept their money intact despite increasing prices. The most significant percentage in any category, 67% of those 77 or older, claim they have not been using their money.
Furthermore, the author shares the survey on spending based on various age demographics. She also discusses the importance of financial strategy to budget during higher inflation.
To read the original article, click on https://www.forbes.com/advisor/banking/survey-savings-and-inflation/