Inflation: A Third of Americans Have Dipped Into Savings — How To Avoid It

Dollar bills in glass jar on wooden table.
Julia_Sudnitskaya / Getty Images/iStockphoto

This year’s inflation has canceled out last year’s stimulus for much of the country as rising prices have forced people to raid the savings accounts they grew during the pandemic. 

According to a GOBankingRates study of 1,000 adults, more than one in three people — 35.54% — have tapped their savings as their dollars have bought them less gas, food and everything else month after month.

Only 18% of those ages 55-64 have dipped into their savings, the lowest percentage of any age group. The worst off have been the youngest adults: 52% of 18- to 24-year-olds have raided their emergency funds to cope with rising prices.

The whole point of saving money is to get you through trying times like these; but, with a recession looming, you will want to keep your financial cushion as puffy as possible so it’s there when you really need it.

GOBankingRates asked experts from various fields to share their best strategies for surviving today’s high inflation without looting your savings account. Here’s what you need to do.

Get Everyone on the Same Page

Step 1 is to discuss the subject with your household. Be open about your financial plans and how you’ll adjust your budget to pursue them.

“Be aligned on overall life goals with your partner and/or family,” said Tanya Peterson, consumer finance expert and vice president of brand at Freedom Financial Network. “It’s not an easy task and will take careful thought, time and compromise.

Make Your Money Work for You

“Goals that are important could be taking a vacation, buying a new TV, retiring and having enough time to pursue a hobby or interest every week. Whatever they are, large or small, once you can set and agree on them, you can build a budget that prioritizes the goals. Then, cutting out some items on the next trip to the grocery store, or turning the thermostat up to save on energy bills, won’t seem so hard when you know why you’re doing it.”

Start Tracking Your Spending

The next step is to start doing what you should have been doing all along: keeping track of your spending.

“Especially as inflationary pressures rise, staying organized and aware of your financial situation is key to building financial independence and overall happiness,” said Lisa Fischer, chief growth and lending officer of the fintech company Mission Lane.

You can use a spreadsheet or an app, and there are endless strategies and methods, but all budgets start the same way.

“The first thing that an individual should do before allotting their monthly budget is to list all expenses they pay in a month,” said Sarah Ross, financial adviser and co-founder of CocoLoan. “Classify each one as essential or non-essential so that the degree of necessity can be determined.”

Ross suggests listing expenses according to their urgency.

“During a tight budget, there are expenses that are necessary but are not immediately needed so you can delay them for a while,” she said. “Categorize carefully and allot your money on the topmost of the list. If there is still excess money, you can include those not-so-essential expenses or, better yet, save it for future rainy days.”

Make Your Money Work for You

Now the Hard Part: Spend Less

Unless you can earn more money, you’ll have to cut spending to avoid plundering your savings as inflation continues to shrink the dollar’s buying power. The first place to trim the fat is probably the recurring bills you’ve set to autopilot.

“I would review every subscription and automated payment,” said Chris Kampitsis, CFP and financial planner with the SKG Team at Barnum Financial Group. “From cable to streaming, gym memberships to phone apps. Most people would be surprised to find how much money they can save by cutting the costs of services and programs they no longer use or by making a switch to lower-cost alternatives.”

Kampitsis also recommends capping what he calls “discretionary expenses.”

“Birthdays, weekend dining out, vacations,” Kampitsis said. “Where last year you may not have been as conscious about your spending on these expected ‘unexpected’ discretionary expenses, now is a good time to set some limits.”

Kampitsis’ final advice was a common tidbit: Cook at home instead of ordering or dining out. But you can get even more creative with saving money on food as prices rise.

“Shop at farms, orchards and farmers markets,” Peterson said. “In some areas, you can do this year round. In other areas, now is the time.”

She spoke of the potential savings in buying No. 2 grade, or “ugly,” produce, which doesn’t meet the cosmetic standards of grocery stores but is otherwise identical.

Make Your Money Work for You

“B or No. 2 produce can be half off or more, with the same taste and nutritional value as A,” Peterson said. “Just while not looking quite as perfect.”

Spend Money To Save Money: Talk to a Pro

If you do dip into your savings, the money might be best spent on a financial professional with the skills and experience to inflation-proof your life. If it saves you money in the long run, it’s an investment, not an expense. 

“Now is a good time to meet with a trusted financial representative to make, review or adjust your financial plan,” said Adam D. Schwery with Country Financial in Gladstone, Mo. “This could include saving more, adjusting investments, re-setting or re-prioritizing goals, and paying down or refinancing debt.”

More From GOBankingRates


See Today's Best
Banking Offers