Topic: What is The Negative Effect of Inflation on Household Savings? (Read 1308 times)

It is true that many households cannot overcome this situation easily, especially since long-term investments are not always a realistic solution. Limited time and funds, coupled with the risk of losing capital, make many households reluctant to lock up their money in investments where returns are not guaranteed. High APY investments often come with significant risks, which can push low-income households into poverty if losses occur. In addition, high inflation can reduce the real profits from these investments, so that purchasing power remains affected. Practical solutions that can help include policies that support cost-of-living savings, such as energy subsidies, food assistance, and affordable housing programs. Financial education and access to more affordable and low-risk financial products are also very important. With this multifaceted approach, low-income households can maintain their financial stability and avoid poverty.

its always the purchasing power that plummets and yet people just overlook it, the inflation affects heavily on household saving even more apparent with the monthly spending of a household its not rare that nowaday people hardly save money because they struggle to make ends meet.
so it does have negative impact but good thing world economic condition has been getting better since pandemic now most of inflation rate also keeps up with salary growth but we definitely not talking about blue collar job with stagnating income, the government really need to look into that.

makes me wonder if the average household could overcome this, investing won't be any better either, since its mostly time constraint and most of household can't afford their money locked for period of time, also APY sometime doesn't really outweigh inflation even if we invest in the high performing investment, the investment that has higher APY always carries risk, most household also can't risk of losing money and then become homeless.
those definition above is good to understand how purchasing power is the one that got affected most, but finding solution is also hard thing.

the fact that based on your study mentioned that lower income household having hard time saving means they are just few steps away from poverty.

Inflation is greatly feared by everyone, including industry players or households, because prices will increase because the value of the money held becomes meaningless.
I agree, inflation has a very negative impact on increasing prices in the market, so that it can be uncontrollable.
But inflation is always like a knife, some benefits but not a few will be harmed. It all depends on the impact that occurs.

Inflation has a negative impact on household savings. This is because inflation erodes the purchasing power of money, making it more difficult for households to save. As prices rise, the value of money decreases, reducing the real value of savings. Additionally, inflation can lead to a decrease in the standard of living, making it harder for households to save. For example, a study found that nearly three in four lower-income households are saving less due to inflation, and those with no emergency savings are more likely to have less than $500 in the bank.

If you want to be more specific, you can press the link below:
https://typeset.io/questions/what-are-the-effects-of-inflation-in-household-savings-and-3sle1raddy
https://www.bankrate.com/personal-finance/effects-of-inflation-on-lower-income-emergency-funds/
https://cepr.org/voxeu/columns/households-response-wealth-effects-inflation

Fighting inflation requires joint efforts between countries because today's countries are closely linked to each other through trade transactions. Therefore, a country will not be able to fight inflation if the remaining countries do not cooperate and help, which is why repelling inflation in each country is very difficult, if not impossible.

Not to mention, great powers often abuse their power and influence to export inflation to smaller countries. So many governments are failing to control inflation.

It can be said that inflation is a global problem and to be able to fight it requires the cooperation of all countries, no government can unilaterally repel inflation.

Current times are really hard for the young people. We do earn and save a little but we have no place to invest. Real estate is too costly and our savings won't cover the monthly mortgage. Stock markets are not growing as strong as in the past and only a selected few are getting success. The similar trend has been in crypto. Regular and Intraday traders might be getting money but it's hard for investors and of all, the bank interest don't cover the inflation. i.e. we are losing money as we hold onto it.
I've recently shifted to getting interest on Stable coin that do cover the current inflation but that tok is not a good long term strategy.

it takes quite a long time to overcome inflation with high price values, and it is difficult to suppress it because the problems we are facing now make it unstable and can cause a stigma in society and indeed this has already happened, both positive and negative, so the impact of this inflation is felt, especially by the lower society and all groups are affected and it is very difficult to control it by influencing aspects of life.

IMHO, most countries do have the same problem whether they're a first world country or a third world or a developing nation. The governments can't just increase the salaries as soon as the people want it to be. But they have ways of increasing it and how to deal with it through yearly increase or whatever they are dictating to the private companies for them to help an individual cope up with the rising prices that's seen not gonna stop anytime soon.

That is one thing but actually, inflation as a concept alone is very complex and if it indeed affects a country there would be basically a domino effect that would happen in the country.

Inflation means less purchasing power and higher prices. Because of this workers would most likely rally and demand higher salaries. Higher salaries would mean more demand and thus income disparity will just get worse and worse. It will be basically a cycle of one thing increasing then the other would follow and so on and so forth.

Inflation would take time to be solved and will not be solved by just one policy implemented that is why it is so hard to take control of it.

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That's hyperinflation. Countries like Venezuela, Argentina, and Zimbabwe, they're on it. I haven't mentioned the others but I think there are some few and amongst them, I think Argentina is doing better than all of them. Please correct me if I'm wrong.

No country really does but one of the reasons why a country goes into a crazy inflation rate is because of the corrupt leadership of a country and as well as sanctions.

Many countries have failed or gone bankrupt due to not being able to overcome the impact of inflation, causing their people to fall into poverty and there are even several countries where people have experienced prolonged hunger. Therefore, no country wants to experience inflation because it could have fatal consequences.

The bank interest rates are dependent on inflation.  If inflation is high, the banks discourage you to spend money by raising the interest rates.  You will be discouraged to make a loan but will be encouraged to put your money in the bank and will not be spend by you.  By this, money in circulation will become lower and will also lower inflation.

Households feel this even more when there is a slightest upheaval in the economies of countries. The impact of this situation is especially greater in underdeveloped countries. It is not easy to eliminate this negative effect. The breadwinner of the household needs to work more or find additional resources. If these resources are not found, they will be negatively affected by the effects of inflation.

One of the biggest problems of today's economies is that the efforts of states against inflation fail to achieve results.

Yes, that's right, as you said, if inflation occurs then the impact will be very dangerous for us as a society, of course on welfare, especially for those of us with low incomes, we will have difficulty buying market goods for family needs, and it will also have an impact on traders because of the decline in people's purchasing power to meet family needs, and this will also have an impact on the country in developing a good economy, with inflation occurring the economy will be hampered.
So the impact of inflation will be fatal if this is implemented in a country whose economy is not yet good.

Associated with the reserves of every country are the first class functionaries of that country, who are only associated with printing money, those who print money never think about the citizens. They only want to please the government of the country, never thinking that they harm the country at the same time.

Inflation can affects the majority of our savings and budgeting skills because the amount that we need to spend to buy our needs in life is changing. It is difficult to suddenly change the price of products and services especially if there is no increase in wages, what is happening now is that all values ​​are increasing but there is no increase in wages, how can people save if all income goes to expenses? Imagine those people who's always in their survival mode because of the inflation.

When you save money somewhere, you do it with a purpose. But when inflation occurs, the prices of all goods rise, which is why saving for a long period of time has both pros and cons. So my suggestion is that if you have money to do homework, you can start homework, not finish it but still do as much as you can.

The negative impact of inflation affects every aspect of life, not only in keeping money at home or saving, but also in day-to-day shopping. Whether it is keeping money in a bank or keeping money at home, the value of money decreases gradually due to inflation.

In my opinion, the impact of inflation on household savings could be negative if the increase in goods on the market is uncontrolled, thereby reducing purchasing power. However, inflation can have various impacts on society, both positive and negative, depending on a number of factors including the level of inflation and the industrial sector.