The Impact of Inflation and Rising Costs on Consumers

The Impact of Inflation and Rising Costs on Consumers
Topics BudgetingCreditSaving

Inflation and rising costs have had an impact on many consumers’ financial security and goals over the past year.

A new survey from WSFS Bank found Americans are confident managing their money, including 91% of respondents in the Greater Philadelphia and Delaware region, but 34% in the region are not confident they could weather an economic downturn or recession.

Wallets Stretched Thinner
The WSFS study found 34% of regional respondents were not confident they could afford rising costs of living, and many are making changes to their spending habits as a result.

Nearly two-thirds (61%) of total regional respondents said they are cutting back on non-essential spending, while 42% said they are delaying a large purchase like a home, car or furniture. Thirty-eight percent of regional respondents are focusing more on paying down debt because of rising costs, while 33% are tapping into their savings to help pay for everyday items.

Rising costs and interest rates have also resulted in 25% of regional respondents saying they have more debt now than a year ago, and 52% said if faced with an emergency expense of $1,000 or more, they would have to borrow money, take out a loan or pay it off with a credit card over time.

Increased costs for everyday items, coupled with rising interest rates, makes it vital to keep a close eye on your finances and your credit usage to avoid falling into debt. Take a close look at your monthly spending for non-essentials that can be cut from your budget, and ensure you’re paying your credit card bills in full each month where possible to minimize the impact of elevated interest rates.

Old Savings Tools Become New Again
While high interest rates are making borrowing and credit more expensive, one silver lining is the opportunity to earn more on your savings after years of low interest rates.

Among the savings tools that have been making a comeback as a result are money markets, high yield money markets and certificates of deposit (CDs), which can provide those with a solid nest egg built up an opportunity to earn more from their savings.

CDs provide a fixed rate of return, which allows you to see how much you will earn on your savings, but you will not have access to your money during the term. Money market accounts earn interest over any period of time and are considered liquid, so you can make deposits and withdrawals, which may work better for consumers who know they will need access to their funds.

Do Your Homework
There is no one-size-fits-all solution for saving, so it is important to evaluate which products and services may work best for you and to talk to your banker or financial advisor if you have questions.

It is also vital to do your homework to understand how FDIC insurance affects your financial health and which accounts are covered. Thoroughly reviewing your accounts with your bank is a great way to ensure they’re organized in a way that will maximize your coverage.

Each consumers’ financial journey is unique, but with the proper research, tools and financial discipline, you can help minimize the impact of rising costs on your wallet.

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