How Inflation Has Impacted Money in Traditional Savings Accounts

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This last year has not made it easy to save money. According to a new GOBankingRates survey of 1,000 people, about three out of four have savings accounts, but the biggest percentage by far — about one in three — have only $100 or less socked away.

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Even so, another GOBankingRates study shows that more than half of people consider themselves savers as opposed to spenders. So, how could a nation of savers have so little saved?

The answer might lie in a third revelation from the studies — the rising cost of goods is the No. 1 concern regarding people’s finances. Inflation has not been kind to consumers — or their savings accounts.

If you’re wondering how much money you’ve lost due to inflation, here’s what you need to know.

Inflation Forced America To Drain Its COVID Savings Cushion

The first way that inflation impacted savings accounts was by sending prices up so high that Americans could no longer cover their daily expenses with the cash in their checking accounts.

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“People had to dip into their savings to keep up with rising costs,” said Tom Koesternen, chartered financial analyst and consultant with TheGuaranteedLoans. “As a result, they have lost money that they could have used otherwise.”

According to the Wall Street Journal, Americans put roughly $2.7 trillion extra into their savings accounts thanks to lockdown-era spending reductions and COVID stimulus payments, which dramatically increased household wealth. But at the end of 2021, the New York Times reported that low-income families were already depleting their pandemic-era surplus savings as prices steadily crept up.

The rest of the country wasn’t far behind.

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A few months later in the summer of 2022 — when gas was over $5 and general inflation was at a 40-year high — Forbes reported that two out of three Americans were blowing through their savings to keep up with rising prices. Moody’s estimated that low-income households would be completely depleted within six months.

At the start of the new year, Goldman Sachs estimated that 65% of America’s pandemic savings surplus would evaporate by the end of 2023.

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Even High-Yield Savings Accounts Are Depreciating Assets

Money in savings accounts has been a depreciating asset since the Great Recession. In 2010, APYs hit historic lows and stayed in the basement through the COVID crisis.

Then, the Fed began aggressively raising interest rates to fight inflation, and in eight months between May 2022 and January 2023, the average savings account yield increased by a multiplier of more than five from 0.06 to 0.33%.

Today, standard savings accounts with no minimum deposit or balance requirements are again offering yields north of 4% — something not seen for nearly 15 years.

The problem, however, is that the inflation rate is currently 7.6%.

“The savings yield might have risen by a small fraction, but the losses due to inflation have been substantially higher,” said Koesternen.

Savers with the highest-yield accounts are growing their money at 4.5% while that money loses 7.6% of its buying power. Standard savings accounts have yields of roughly 0.3%, which means $1,000 becomes $1,003 in a year. But in the same year, those same savers would need $1,076 to buy what $1,000 could have bought the year before, tallying a net loss of $73.

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Where Can Savers Turn When Inflation Is High?

In short, inflation forced much of the country to drain their savings accounts and starved the principal of those who didn’t. Although standard savings accounts are once again delivering measurable gains, even the highest yields can’t keep up with rising prices. So where can America’s aspiring savers turn for relief?

A Money Market Fund Can Guard and Grow Your Cash

One strategy is to move the money in your standard savings account to an alternative that’s just as liquid but more convenient with the potential for higher yields — and none of the risk of the stock market.

“Consider putting your savings in a money market fund, where your money is invested in short-term, low-risk debt securities, such as government bonds, Treasury bills, and commercial paper,” said Peter Hoopis, chartered financial consultant and owner and CEO of Peter Hoopis Ventures. “The goal of a money market fund is to provide investors with a relatively stable source of income while preserving capital.”

Inflation-Adjusted Treasuries Were Designed for This Moment

The federal government offers savings options tailored specifically for times of fast-rising prices.

“Consider inflation-protected savings vehicles, such as inflation-protected bonds, designed to protect your purchasing power against inflation,” said Hoopis.

Hoopis speaks of Treasury Inflation-Protected Securities (TIPS) and Series I bonds, which currently offer locked-in rates of 6.89% with virtually no risk.

“These investments generally offer lower returns than traditional savings vehicles. Still, the returns are tied to the inflation rate, so your savings will grow in line with the cost of living.”

T-Bills Have Crushed CDs During the Inflation Crisis

Many savers might be tempted to take money from their standard savings accounts and lock in today’s high rates with an even higher yield in a CD. The logic is sound, but they should take a second look at their savings vehicle of choice.

According to the St. Louis Fed, CDs and Treasury bills performed almost identically before the inflation crisis, with both delivering nearly invisible returns of 0.1% during the summer and fall of 2021. But when the Fed began raising rates, T-bills took off, but banks remained stingy — and CD rates barely budged.

Here’s how CD rates grew between October 2021 and October 2022, when the Fed funds rate hit 3.78%:

  • 3-month CD: 0.1% – 0.19%
  • 6-month CD: 0.1% – 0.38%
  • 12-month CD: 0.1% – 0.6%

Here’s how T-bill yields rose during the same time:

  • 3-month Treasury: 0.1% – 4.15%
  • 6-month Treasury: 0.1% – 4.48%
  • 12-month Treasury: 0.1% – 4.51%

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About the Author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was formerly one of the youngest nationally distributed columnists for the largest newspaper syndicate in the country, the Gannett News Service. He worked as the business section editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as a copy editor for, a financial publication in the heart of Wall Street's investment community in New York City.
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