Inflation may be abating, but its impact on Americans' savings remains a quiet crisis. Many find themselves dipping into their reserves just to keep up with daily expenses. While the rate of inflation has moderated in recent months, it continues to have a lagging effect on consumers. A recent study shows over 80% of Americans with credit card debt reported increased anxiety and a growing reliance on credit for essentials as inflation continues to eat into household budgets, with millennials, minorities and lower-income groups especially hard-hit.
This isn’t just a story of inflation, but of compounding challenges that affect the average saver’s ability to set money aside. While financial institutions can’t control market forces, they play a critical role in helping people develop strategies to safeguard their savings against today’s economic pressures.
Actions you can take, with the support of financial institutions
Data shows that many Americans are pivoting from saving to survival mode. According to Allianz Life’s recent Q3 survey, 66% of Americans still expect inflation to worsen over the coming year, a sentiment pushing them to make protective, risk-averse financial decisions. Moreover, many have scaled back on regular contributions to their savings, a trend that disrupts long-term financial security.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
These times are forcing many to shift in focus from traditional saving to more adaptive approaches that take inflation and rising costs into account. Here are some strategies that individuals and institutions alike can consider:
Prioritize emergency funds
Build a strong emergency fund that covers three to six months of expenses. This serves as a financial cushion against unexpected costs or job loss, providing a reliable fallback that doesn't require tapping into long-term savings.
Consider financial tools with growth potential
High-yield savings accounts can be valuable in preserving purchasing power. While high-yield accounts may currently offer lower returns due to recent Federal Reserve rate cuts, their benefits compound over time, providing a reliable balance between accessibility and growth.
If you haven’t already done so, research what your local credit unions are offering for high-yield accounts, as they typically offer much better rates than those from big banks.
Encourage diversified investments
Diversifying beyond traditional savings into a mix of conservative and growth-oriented investments can mitigate risk. Investment options, such as TIPS and I-bonds, certificates of deposit (CDs) and target-date funds enable savers to keep pace with inflation while protecting against volatility.
Manage your debt and seek financial education
With credit card balances now outpacing savings for many, financial education on responsible borrowing and debt consolidation becomes essential. Consolidating high-interest debt into manageable, fixed-rate payments or refinancing can help individuals avoid accruing additional debt and maintain financial stability.
Financial institutions play an important role here by providing accessible, easy-to-use resources and educational programs to guide consumers in managing debt smartly. Some, like Affinity, offer programs virtually and in-person consultations, providing the opportunity to connect directly with experts who can help pave the way toward paying off debt.
Focus on financial literacy and budgeting skills
Rising prices make it harder to stretch each dollar, reinforcing the importance of strong budgeting skills. Financial institutions should prioritize financial wellness programs that help members make informed decisions. This could include guidance on creating achievable budgets, recognizing areas to cut back, and identifying high-priority savings.
Facing today’s complex economic pressures requires more than traditional saving strategies — it demands a holistic approach to financial well-being. Financial institutions are in a unique position to support our customers or members with the knowledge and tools needed to protect their financial futures.
The silent crisis of savings erosion doesn’t make daily headlines, yet it affects countless households and communities. Through practical solutions like building emergency funds, debt management education and appropriate investment strategies, we can empower individuals to not only survive but thrive through challenging economic periods. The sooner we address these changes, the stronger we can all emerge on the other side.
Related Content
-
RMD Deadline April 1: Five Tax Strategies to Manage Your 2025 IncomeTaxable Income The April 1, 2025, deadline for required minimum distributions (RMDs) is fast approaching for retirees who turned 73 in 2024.
-
Rising AI Demand Stokes Undersea InvestmentsThe Kiplinger Letter As demand soars for AI, there’s a need to transport huge amounts of data across oceans. Tech giants have big plans for new submarine cables, including the longest ever.
-
How Much Does Being Rich Matter in Retirement?After a certain point, having more money in retirement won't make you any happier, new research shows. Instead, physical health, a sense of purpose, and a minimal amount of non-mortgage debt are more relevant.
-
The Three Biggest Fears Keeping Retirees Up at NightHere are the steps you can take to put those fears to rest and retire with confidence so you can relax and enjoy the life you've planned.
-
What Can a Donor-Advised Fund Do for You? (A Lot)DAFs and private foundations go about helping charities (and those who donate) in different ways. Each comes with its own benefits and restrictions to navigate.
-
Estate Planning When You Have International AssetsEstate planning gets tricky when you have assets and/or beneficiaries outside the U.S. To avoid costly inheritance mistakes, it pays to understand the basics.
-
Microsoft Stock: Innovation Spurs Its 100,000% ReturnMicrosoft's ability to recognize the "next big thing" has allowed sales – and its share price – to grow exponentially over the years.
-
6 Great Vacation Ideas for Wheelchair UsersThese six places provide plenty of travel inspiration for people who use wheelchairs.
-
Three Essential Estate Planning Steps to Protect Your Nest EggAfter dedicating years to building your wealth and securing your future, make sure your assets are protected and your loved ones are provided for in the future.
-
Is Chasing the American Dream Ruining Your Financial Life?Too many people focus on visible affluence as a marker of success. Here's how to avoid succumbing to the pressure and driving yourself into debt.
