How High-Yield Savings Can Help You Stay Ahead of Inflation

Life is made of memorable moments. A child’s graduation or wedding. A weekend getaway reminiscing with old friends. You’re banking on even more moments like these, but are you making the right choices to ensure your savings stretch that far? While inflation can be a sign of a growing economy and job market, it can alsoimpact your purchasing power.

Inflation is usually measured as an annual percentage. The U.S. Labor Department’s Consumer Price Index (CPI) tracks costs for the same goods each month and uses the data to calculate inflation rate. You can use this rate to determine how much you need to save to come out ahead. For example, in 2017, the inflation rate was 2.1%. That means:

  • $1 in January 2017, was worth 97.9¢ in January 2018.
  • In other words, you’d need $1.02 to buy the same goods a year later.
CPI Inflation Calculator: See how your buying power changes over time.

This may not seem like a lot, but over time, inflation erodes the value of the money in your wallet and bank account. High-yield savings accounts and certificates of deposit (CD) are attractive because they earn higher-than-average interest rates that typically offset inflation.

The inflation rate also tells you how much investments in stocks, bonds and funds need to earn for their purchasing power to remain steady over time. Unlike savings accounts, which accrue interest at a rate set by the bank, the return on those investments vary by investment type and are influenced by a wide array of factors. Review your investments with a financial advisor to understand how inflation may impact your portfolio.

Offset inflation with these 4 tips:
  1. Build the largest nest egg you can. Planning for inflation during your career will give you more wiggle room to cope with rising prices as you age, says Walter Updegrave, editor of Real Deal Retirement and MONEY Magazine.
  2. Increase contributions to your savings accounts. Establish automatic, recurring transfers from your paycheck, quarterly bonus or checking account.
  3. Adjust your contributions. Review the inflation rate annually and adjust your contributions by at least that amount. Check to see if your contributions can be automatically adjusted.
  4. Boost your salary. A study by Payscale found that less than half of Americans ask for a raise.1 Yet 75% of those who did saw their paycheck increase. Those who earn $150,000 or more a year were the most likely to see their employer match their request. When your salary increases, so can your savings contributions.

Inflation will continue to rise year after year. Keeping your eye on the inflation rate and maximizing your savings will ensure your memorable moments increase right along with it.

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Reference: 1. Renzulli, Kerri Anne. (2015, January 28). New Study Reveals the Odds You’ll Actually Get the Raise You Ask For. Retrieved from