Tips to save when inflation is high

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Consumers likely need no reminder that inflation has taken a notable toll on their finances in recent years. The cost of products and services has seemingly skyrocketed, leaving consumers with little recourse other than to scale back and find ways to save.

The online financial resource Investopedia notes that the inflation rate is the percentage change in the price of products and services from one year to the next. Data from the U.S. Bureau of Labor Statistics indicates the inflation rate reached 8% in 2022, or four times the 2% rate of inflation the Federal Reserve aims to maintain through its various monetary policies. Though the U.S. Inflation Calculator indicates the inflation rate cooled to 2.5% by the end of summer 2024, that may not comfort consumers who are still confronting high prices on various items, including housing.

Indeed, inflation continues to affect people from all walks of life. However, consumers can consider various strategies to save even when inflation is keeping costs up.

• Use rewards to your advantage. Consumers now have an array of ways to pay for products and services at their disposal. Conventional wisdom has long suggested credit cards should be used only in emergencies, but consumers who are confident they can pay off balances in full each month can consider using rewards-based credit cards to their advantage. Such cards return a certain percentage of each purchase (typically around 1% to 2%) to consumers, and they can be used to purchase everyday items like groceries and gas. Of course, this only benefits consumers if they pay off their balances in full each month. If not, the interest charges on credit cards will almost certainly exceed the 1 to 2% cash back consumers earn.

• Open a high-yield savings account. The days of earning significant interest on savings accounts may seem like a distant memory, but high-yield savings accounts are still available at many financial institutions. Consumers intent on building their savings in the face of a higher cost of living can look into high-yield savings account options at their own bank or another financial institution. High-yield savings accounts typically mandate account holders maintain a minimum balance that is considerably higher than the minimum balances on accounts with lower interest rates, so this might not be an option for everyone. But consumers who have already squirreled away a significant sum in their savings accounts may be able to grow their money, and thus overcome inflation rates, by transferring the balance to a high-yield savings account.

• Examine your spending. Perhaps the simplest way to save when inflation is high is to periodically assess your spending habits and make tweaks designed to save money. Such assessments can include everything from identifying ways to save at the grocery store to determining if entertainment subscriptions are worth the investment. Many consumers have lamented the high cost of groceries since 2022, and it’s possible a membership to a wholesale retailer like Costco® can help reduce expenditures on various items, including paper products, that tend to be expensive at more traditional grocery stores.

Data indicates inflation has cooled considerably in 2024. But the cost of many items remains high, forcing consumers to rely on various ways to save money.