Amid high inflation, Americans begin to dip into savings: Forbes Advisor

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Americans are dipping into their savings to control continuing inflation. But doing it now could have a long-term impact on your financial health.

Twenty percent of Americans have pulled more out of their savings in recent months than they usually do, according to the latest Forbes Advisor-Ipsos Biweekly Consumer Confidence Tracker. And 20% said they had spent more money than usual in recent months.

Those rates have held steady since Forbes Advisor and Ipsos first asked participants about their spending and saving habits in December, indicating that households continue to turn to saving to manage rising costs.

However, 21% of those surveyed said they have paid back their loans or credits less than usual.

The survey, conducted by Ipsos, measures consumer sentiment over time.

Chris Campbell, chief strategist at corporate risk consulting firm Kroll, explains that direct aid to American households during the pandemic gave the average American family a bit of savings protection. But people started taking money out of their savings accounts in the last stages of Covid last year.

“The average American family has to make tough decisions,” says Campbell. “They don’t get paid more, but they face [price] increases in basic products, such as gasoline and food.”

Read more: Gas prices soar to over $4 a gallon. This is how to save at the pump

High gasoline prices continue to put pressure on consumer budgets. Digital wealth management company Personal Capital says its average user spends $14 more every time they fill up the pump, according to anonymous data provided to Forbes Advisor.

Keri Danielski, director of communications at personal finance management company Mint, also noted increases in gas and fuel spending among Mint user data. But not all users are feeling those price increases at the same level. “[Locations] where spending is down are largely metropolitan areas where public transportation and other alternatives to driving, such as ride-sharing, are common,” he says.

Americans who don’t need to spend on gas may still feel hurt by rising utility costs. There has been a 9% increase in electricity costs between February 2021 and February 2022.

While the Fed is raising rates to control inflation, Campbell says external factors such as supply chain problems and Russia’s war on Ukraine are beyond the Fed’s control. And they contribute significantly to price increases in some categories, such as fuel.

Job optimism continues to lift overall consumer confidence

But while inflation is likely to stick around for a while, consumers still feel some optimism. The Ipsos jobs index rose about a point to 67.3 this week, the highest of any subcategory the survey tracks.

Today, the Department of Labor announced that jobless claims filed last week fell to their lowest volume since 1968.

And while the unemployment rate for March fell slightly, it was back in line with pre-pandemic unemployment levels.

Consumer confidence in their job security and employment prospects has remained steady over the past few months.

Although starting salaries are rising as the economy reopened after Covid lockdowns eased, Campbell says strong wages and plentiful job opportunities are helping many households manage rapid inflation.

But if job growth slows, Campbell warns, wages often end up falling as well. After all, if a lot of people are looking for jobs, employers may not need to offer competitive salaries to attract applicants. If that happens, many Americans could have an even harder time coming up with the cash they need for essentials.

And if Americans are dipping into their savings accounts now, making ends meet could get harder as inflation drags on. The central bank’s rate hike will push up interest rates on credit cards and loans, just when some households may need to turn to these tools to make ends meet.

Survey methodology: Ipsos, which surveyed 933 online respondents on April 4 and 5, provided the results exclusively to Forbes Advisor. The survey is conducted bi-weekly to track consumer sentiment over time, using a series of 11 questions to determine whether consumers feel positively or negatively about the current state of the economy and where it is headed in the future. .

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