4 Tips to protect your savings from inflation

Updated September 5, 2024  |   Published December 29, 2022

Categories:  
• Saving & Budgeting

The effect inflation has on the economy can highly impact your savings goals. As inflation rises, the money you put away in your savings account has to rise with it. Otherwise, you lose buying power. Additionally, the rising cost of goods has made Americans dip into their savings to afford what they need. What actions can you take to protect the money in your savings and keep it from dwindling?

If you’ve opened a savings or money market account for yourself, you are already on the right path. At Webster First, your accounts are insured by the NCUA (National Credit Union Administration) and MSIC (Massachusetts Credit Union Share Insurance Corporation.) This means your money is protected by the NCUA up to $250,000 per account. Excess shares and deposits are insured fully by the MSIC in the unlikely event of credit union failure. But protecting your savings goes beyond just insuring your money. Since a credit union failure is extremely unlikely, the only person who can ensure that your money stays in your accounts is you. Read on for tips on how to protect your savings and keep it from disappearing.

 

1. Limit frivolous spending

We’ve all been through the cycle. You put money in your savings in case of an emergency and then you take it back out to buy something you’ve been wanting, but might not necessarily need (and definitely was not an emergency.) A 2024 Bankrate survey showed that 27% of Americans surveyed have no emergency savings, and 39% couldn’t cover 3 months expenses. In order to be prepared for those unexpected expenses, prioritize your spending on things that are actually necessary.

How many subscriptions are you paying for that you don’t use? Cancel them. Use coupons at the grocery store and take advantage of rewards programs at gas stations that will give members a lower price. Try cooking at home and limit your vacations or travel locally for a low cost getaway. It may feel boring, but you will take comfort in having your money safely tucked away when life throws you a curveball.

 

2. Secure your money in a share certificate

The most effective way to make sure you can’t spend the money from your savings is locking it in a share certificate. When you open a share certificate, your money will be untouchable for the term you choose. For example: you could choose a 6 month term, a 12 month term, or even a 60 month term (check our rates page for more term options.) The various terms have varying rates, but your rate will be fixed at whatever it is when you opened the account.

There is a penalty to withdraw your money early, making it more likely that you won’t want to touch it until your term is up. You then have the option to move your money to a different account or roll it over into a new share certificate. In addition to keeping your money safe, share certificates will benefit you by earning higher rates than your traditional savings account. So the more money you put into it, the more you earn. Visit our share certificates page to learn more about the special rates we have on select certificates right now.

 

3. Reduce high-interest debt

If you carry a balance on high interest credit cards, a good chunk of your monthly income may go to those bills. Here are three ways to reduce your interest rate, and subsequently, your debt.

1. Consider opening a balance transfer credit card with 0% APY for the first year. You can transfer debt from high interest cards to this new card. Then, pay the balance down without accruing interest over the year. Be careful of the terms and know when interest kicks in, and for how much.
2. If you have other high interest loans that you could refinance to a lower rate, do that as soon as possible.
3. Consolidate your debt with a home equity loan. Home equities typically have much lower interest rates than credit cards or personal loans. If you own a home, you can use your equity to consolidate high interest debt. Read our article about home equity loans to learn more.

Check our our ultimate guide to paying off debt for more resources, strategies, and calculators to help you toward debt freedom.

4. Budget, budget, budget

We’ve said it before and we’ll say it again. Make a budget and stick to it. Really look at your finances and figure out where you’re spending more money than you need to be.

• Overspending on groceries? Buy in bulk for better value or simply consume less.
• Overspending on car insurance? Look into getting a new plan that will lower your monthly payment. Many insurance companies offer the option to pay your annual premium in full, rather than month to month, for a discount. Find out if you qualify for other discounts like safe driver discounts, multi-car discounts, or home and auto bundle discounts. FYI – Webster First members get an exclusive member discount when they purchase a plan through our subsidiary, WebFirst Insurance.
• Overspending on your phone plan? Your phone carrier may offer discounts on family plans, autopay discounts, or even reduced prices for streaming services.

Webster First’s budgeting tool in online banking can help you identify overspending and track your progress to saving.