Americans accumulated additional savings during the pandemic, but that money is rapidly dwindling due to inflation.
About 70% of Americans use their savings to cover rising prices, a recent Forbes Advisor poll completed by 2,000 US adults. Among respondents, older adults were more likely to say they kept their savings intact.
In fact, the personal savings rate for April 2022 hit 4.4% — the lowest since September 2008 — versus 6% at the start of the year, according to the Bureau of Economic Analysisa division of the US Department of Commerce.
Though some Americans have built up savings during the pandemic with support from government COVID-19 benefits, those savings appear to be running out as people cope with soaring prices.
Laura Veldkamp, a finance and economics professor at Columbia University, suggested renegotiating salaries with their employers. “Prices will not go down again,” she said. “They never do.” Saving to deal with rising prices is not a sustainable long-term solution, she added.
The rise in the cost of living is making Americans nervous. Inflation rose 8.6% year-to-date through May, the highest level since 1981. A US Consumer Confidence Survey fell to a three-month low of 106.4 in May. This is one of many polls that indicate people are taking a pessimistic view of both their own finances and the US economy.
Grocery inflation hit a record high of 14.6% year-on-year for the week ending May 29, according to data company Numerator’s latest survey. The survey shows that middle-income consumers — those who earn $40,000 to $80,000 a year — are paying the largest price hikes of any income bracket.
“‘Budgeting doesn’t have to be painful.’”
In April consumer spending increased by $152.3 billion, the Office of Economic Analysis found separate data on when people spend the most money on motor vehicles and auto parts, in addition to food and housing. Compared to the previous month, consumption of gas and other energy fell by $26.9 billion.
On Sunday, AAA set the national average at $5.01 for a gallon of gasoline. That’s up 20 cents from a week ago, up 60 cents from a month ago, and nearly $2 from the average of $3.07 a year ago, according to AAA data.
Thomas Scanlon, a financial adviser at Raymond James Financial in Manchester, Conn., said it’s a good time to adopt frugal habits, like museums and beaches.
“Cutting the budget doesn’t have to be painful,” Scanlon said, “it can be an opportunity to have a good time with friends and family.”
https://www.marketwatch.com/story/prices-will-not-come-back-down-americans-dip-into-their-savings-to-cope-with-record-high-inflation-11655090531?rss=1&siteid=rss ‘Prices Won’t Go Down Again’: Americans are drawing on their savings to deal with record high inflation