How to save more when inflation makes your money count less

When it comes to purchasing power, inflation means that things cost more and that your money becomes less valuable. When a period of high inflation hits – like right now – you may want to consider changing the way you manage your finances to protect the value of your money.

“Inflation is a time for investors and savers to reevaluate their strategies,” said Walter Russell, CEO of financial advisory firm Russell and Company.

Through the Federal Reserve, the government is trying to fight inflation on a large scale by raising the federal funds interest rate, which is the interest rate that commercial banks use to lend and lend money to each other.

When the cost of borrowing becomes more expensive, higher interest rates seep down to consumer products such as loans and mortgages, making them more expensive. But higher interest rates can also apply to deposit accounts, which means that banks are starting to offer higher interest rates on checks, savings and certificates of deposit.

No one knows what the future will bring, but by making changes to how you spend and where you keep your money, you may be able to cope with times of inflation more easily.

Here are some ways to save more during periods of inflation.


It can be frustrating not to be able to get loans for large purchases as easily during periods of high inflation. Still, consumers can take advantage of higher interest rates on bank accounts to combat the effects of inflation on their cash. Bank branch rates do not usually beat the inflation rate completely, but these accounts can help hedge against inflation much better than having cash at home or on a low interest rate account.

The national average annual percentage return on savings accounts is 0.06%, according to the Federal Deposit Insurance Corporation, but there are plenty of financial institutions that offer rates that are much higher – some even 1.00% APY or more. To find these interest rates, you can research accounts with high returns or high interest rates and choose the bank that works best for you.


If you have not reviewed your budget for a while, this may be a good time now. During the pandemic, you may have subscribed to several streaming services that you no longer use, or you may be spending more money eating out or paying for more convenience services now.

Some people are taking even more radical steps to save money. Amanda Claypool, a financial blogger based in the state of New York, has recently made major lifestyle changes to keep her costs low in the face of inflation. She spent 2021 living outside her car as she drove around the country and plans to soon return to that way of living to save on housing costs. She has also tried to reduce her budget by cycling 160 km round trip to work and by eating more rice and beans, a cheap but healthy meal.

“I am concerned about rising food costs and the impact that will have on the entire supply chain,” Claypool said in an instant message. “I use the time now to prepare for future food insecurity by learning what food my body actually needs compared to what I like to eat. This may seem drastic, but it helps me save money and eat better in the short term. . “

Not everyone can or does not want to move into their car, but Claypool’s money-saving tactics can work on a smaller scale. You can cycle more often instead of driving everywhere, and you can reevaluate your food budget to add more cheap healthy meals. For a bigger change, you can reduce your living space to save even more money.


It is a good idea to keep short-term cash – such as an emergency fund – available in a savings account, but if you have savings that you do not expect to need in a year or more, you may want to consider investing these funds or buying a government bond.

“For someone who has a lot of money on the sidelines, (investing) can help you not lose money,” says Russell. “More people may be willing to take more risks because they want a higher return.”

Russell also recommends that consumers consider acquiring TreasuryDirect Series I savings bonds, which can yield over 7% interest rates of up to $ 10,000 over a one-year period. These bonds are basically like a proof of deposit: you put your money in one for a year, and at the end of the year you have a guaranteed return that will hopefully remain higher than the current inflation – so your money wins. t lose in value.

The government will continue to review inflation data and make appropriate changes to the federal funds rate. However, there are other factors that could slow down inflation in the coming year, such as changes in global supply chains that could free up inventories and lead to lower commodity prices. Regardless of whether inflation goes up or down, it is a good idea to keep an eye on how you can optimize your savings.


This column was submitted to The Associated Press by the personal finance website NerdWallet. The content is intended for educational and information purposes and does not constitute investment advice. Chanelle Bessette is a writer at NerdWallet. Email: Twitter: @crbessette.


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