How to Save More When Inflation Makes Your Money Matter Less

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

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

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

When the cost of borrowing becomes higher, higher interest rates trickle 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 banks are starting to offer higher interest rates on checks, savings and certificates of deposit.

No one knows what the future holds, but by changing how you spend and where you keep your money, you may be able to weather periods of inflation more easily.

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


It can be frustrating not being able to get loans for big purchases so easily during times of high inflation. Yet consumers can take advantage of higher interest rates on bank accounts to combat the effects of inflation on their cash flow. Interest rates on bank accounts usually don’t totally beat the rate of inflation, but these accounts can help protect against inflation much better than keeping money at home or in a low-rate account. .

The national average annual percentage return on savings accounts is 0.06%, according to the Federal Deposit Insurance Corporation, but many financial institutions offer much higher rates, some even as high as 1.00% APY or more. To find these rates, you can search for high yield or high interest accounts and choose the bank that suits you best.


If it’s been a while since you’ve looked at your budget, now might be a good time. 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 take even more drastic measures to save money. Amanda Claypool, an upstate New York-based financial blogger, recently made bigger lifestyle changes to keep costs down in the face of inflation. She has spent 2021 living out of her car driving across the country and plans to return to this lifestyle soon to save on housing costs. She also tried to cut her budget by traveling 26 km to and from work and eating more rice and beans, a cheap but healthy meal.

“I am concerned about rising food prices and the impact this will have on the entire supply chain,” Claypool said via direct message. “I use the time now to prepare for future food insecurity by learning what foods my body really needs versus what I like to eat. This may sound drastic, but it helps me save money and eat better in the short term.

Not everyone can or wants 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 healthy, inexpensive meals. For a bigger change, you could downsize your accommodation to save even more money.


It’s a good idea to keep short-term cash – like an emergency fund – accessible in a savings account, but if you have savings that you don’t think you’ll need for a year or more, you’ll want to perhaps consider investing these funds or purchasing a treasury bond.

“For someone with a lot of cash in reserve, (investing) might help you not lose money,” says Russell. “More people might be willing to take on more risk because they want a higher rate of return.”

Russell also recommends consumers consider getting Series I savings bonds from TreasuryDirect, which can pay an interest rate of over 7% on up to $10,000 for a one-year term. These bonds are basically like a certificate of deposit: you put your money in one for a year, and at the end of the year you have a guaranteed rate of return that hopefully stays above the rate of inflation. current – so your money won’t lose value.

The government will continue to review inflation data and make appropriate changes to the federal funds rate. However, other factors could dampen inflation over the coming year, such as changes in global supply chains that could release inventory and lead to lower prices for goods. Whether inflation is rising or falling, it’s a good idea to keep an eye out for ways to maximize your savings.


This column was provided to The Associated Press by personal finance website NerdWallet. The content is for educational and informational purposes and does not constitute investment advice. Chanelle Bessette is a writer at NerdWallet. Email: [email protected] Twitter: @crbessette.


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