Tips to Combat Inflation and Rising Interest Rates’ Impact on Your Finances

It’s no secret that inflation and rising interest rates have impacted many consumers’ financial security over the past year.

A survey from WSFS Bank found that 34% of regional respondents were not confident they could afford rising costs of living, leading many to change their saving and spending habits.

Nearly two-thirds (61%) in the region said they are cutting back on non-essential spending, 42% are delaying a large purchase like a home, car or furniture, and 33% are tapping into their savings to help pay for everyday items.

Changing spending routines can be challenging, but there are small things you can do to reduce spending. Digital tools like online and mobile banking can make it easy to see what you are spending and where in real time to adjust as needed.

Here are tips to help combat the impact of inflation and rising interest rates on your finances.

Saving for a Rainy Day with Fixed Returns
Building an emergency fund (52%) was the top goal among regional survey respondents.

While rising interest rates have resulted in borrowing costs increasing, there is a key tradeoff: the opportunity to earn money on your savings. After years of low interest rates, savings tools like certificates of deposits (CDs) are making a comeback.

CDs can come with terms ranging from a few months to years, and you’ll get a fixed rate of return based on the rate your bank offers and the length of the CD’s term.

With a CD, you won’t have access to your funds until the term expires, so it is important to use them in instances where you can leave the money and watch it grow for the term.

Grow Your Savings with Access to Your Cash
If you’re looking to build your savings but need access to your cash, money markets and high-yield money markets are two other savings vehicles that offer higher interest rates than traditional savings accounts and allow you to deposit and withdrawal your money.

If you are saving for a longer-term goal such as a house, consider not linking your savings accounts to your debit card to create a bit of separation between your account used for regular purchases and your savings.

The minimum balance required to avoid fees with high-yield money markets is typically higher than with a regular money market. If you’ve built a larger nest egg, a high-yield money market may make more sense for you, but for those with less saved, a standard money market can still provide an opportunity to earn more than a traditional savings account.

Maximize Your Coverage
FDIC coverage and limits have also been top-of-mind for many consumers lately, so it is important to know what is covered and how to maximize your accounts’ coverage. Accounts that are FDIC-insured include checking, savings, money markets, certificates of deposit (CDs), and some other accounts.

The FDIC’s Electronic Deposit Insurance Estimator (EDIE) calculator enables you to enter your deposit account information at any insured bank and generate a report showing what funds are insured and what funds are uninsured, if any.

Each consumer’s financial situation is unique, so it is important to do your research, and don’t be afraid to seek advice, as your banker’s job is to help you navigate the financial aspects of your life. Speaking with your local banker for a financial checkup can be a great way to help decide which accounts work for you and what your FDIC coverage is to help set you on a path toward achieving your goals.