When inflation began to climb earlier this year, you may have started to find ways to reign in your spending. Maybe you unsubscribed from the streaming service you bought to binge watch one show, or you started delivering groceries to earn extra cash. Small changes can add up, but when inflation exceeds 8% (with many important necessities climbing even higher), you’re likely to need some additional strategies to cut costs and maximize your savings.
That’s why we’re sharing three creative strategies to save even more money during inflation. With these tips, you’ll be equipped to make the most of your money by protecting your savings from inflation and maximizing your purchasing power.
Why is it important to save money during inflation?
Saving is essential to achieving your long-term financial goals, and inflation has driven costs up 8.3%. However, some items like groceries have increased even more – 11.4% to be exact. While saving money is important in any economic climate, it’s especially important during periods of high inflation. Keep in mind that experts also warn a recession could be on the horizon , meaning unemployment is likely to rise.
Some of the biggest price increases have been on necessities like gasoline, utilities and food. Similarly, certain food items like meats have increased far more in price than other products. Here are just a few ways inflation has been impacting your grocery bill.
|Fruits and vegetables||9.4%|
With the Fed suggesting interest rates could reach 4.6% by the end of this year, consumers will have a harder time securing loans. When the time comes to apply for a home or car loan, you’ll need more funds to secure an affordable loan. However, as inflation continues, it’s important to be strategic about your savings.
Leverage high interest rates to save during inflation
Whether you’re building your savings from the ground up or you’ve already got some funds stashed away, now is a good time to take advantage of high-yield savings options. Perhaps the only benefit of interest rate hikes is their impact on your savings. When the Fed increases interest rates, the interest on your savings can increase too.
Although that boost won’t exactly keep pace with the rate of inflation, it does translate to a higher growth opportunity on your savings. You can make the most of your savings by maintaining an emergency fund in a typical savings account while stashing the rest of your savings in a higher-yield savings option.
What saving options are available to you?
- Traditional savings accounts: typically offer the most flexibility and access to your funds but with lower interest rates than other options
- Money market accounts: offer higher interest rates than traditional savings accounts while maintaining access to your savings
- Certificates of Deposit (CDs): higher-yield than other savings options but withdrawing funds ahead of the term can result in penalties
If you already have some money saved up beyond your emergency funds, now might be a good time to invest in a CD. At the time of writing this, the national average interest rate was 0.17% according to the FDIC.
Meanwhile, CD interest rates range from 1% annual percentage yield (APY) to 3.25% depending on your term. If you feel comfortable setting aside a certain amount of funds for three months to a few years, a CD is a great way to grow your savings at a reliable pace.
Join a credit union to save money during inflation
Another way to make the most of your money during inflation is doing business with a credit union – instead of a big bank. As Maryland’s largest credit union, SECU offers a safer and more affordable alternative to big banks. When your budget is tight, every little bit helps. There are plenty of benefits to doing business with a credit union. Most of all, you’ll simply spend less on account maintenance and loans while earning more on your savings.
Here is a quick breakdown of two areas you’re most likely to notice a major difference when using a credit union over a bank:
- Interest rates: Whereas big banks aim to maximize their profits, credit unions return our profits to members. That means any profit we earn makes its way back to our members in the form of lower interest rates on loans and higher interest rates on savings.
- Member fees: Similarly, SECU members enjoy fewer and lower account fees. SECU checking accounts, for example, have zero monthly maintenance fees. Meanwhile, big banks may charge anywhere from $6 to $15 a month just to maintain a checking account.
Ready to make the change from a big bank to a community institution? Open an account with SECU.
Review your insurance coverage for savings opportunities
Costs have been rising everywhere. You’ve probably already begun to swap out certain grocery items for cheaper alternatives, but everyday purchases aren’t the only place you can be looking for savings. For instance, car insurance rates in Maryland are 43% above the national average due to high traffic density, large numbers of uninsured drivers and a high rate of car theft.
Take a look at your insurance coverage to see if there are areas where you can save money. Maybe you could switch insurance carriers to take advantage of bundling discounts, or reduce your coverage limits to spend less on your premiums.
Additionally, as a SECU member, you can get special rates on insurance coverage through our partnership with TruStage. Whether you’re a driver looking for better rates or a new homeowner ready to leverage discount opportunities, you have an opportunity to save on a variety of important coverage options. See how you can save on insurance with SECU.
Reach your savings goals with SECU
The typical methods for cutting back and boosting your income need a little extra help when staple expenses like food and energy have jumped by over 10% and 19% respectively. For personalized advice on how to reduce spending and protect your savings from inflation, schedule a free financial wellness checkup with one of our trained experts.