By Nathalie Voit
Record high prices have prompted Americans to tap into their savings for financial relief.
According to a June 2022 Forbes Advisor survey of 2,000 U.S. adults, two in three U.S. consumers (67%) have dipped into their savings to cope with rising costs. Eight percent of those surveyed said they had completely drained their savings, while 23% have significantly depleted their funds. According to the survey results, 36% of participants have spent a small amount from their savings.
Younger adults were much more likely than older Americans to have spent some of their savings to deal with inflation. Two-thirds (67%) of respondents aged 77 or older say they have left their savings intact.
Another survey conducted by Bank of America showed consumers spending more to acquire the same amount of goods. For example, credit and debit card data from Bank of America showed spending on non-discretionary items like groceries and gasoline surged in the three months leading to May. While spending on gasoline as a share of total card spending rose from 6.4% in February to 7.8% in May, the average share-of-gas spending for households earning less than $50,000 a year soared to 9.5%. This is because a greater portion of lower-income households’ wages went towards covering essential expenses like gasoline as fuel costs rose 4.1% over the month, BLS data revealed.
At the same time, consumers’ spending expectations continued to rise in May. According to the New York Fed’s monthly Survey of Consumer Expectations, one-year ahead inflation expectations rose from 6.3% to 6.6% last month, tying a previous record high. Household spending expectations for the near-term also increased by 1.0% to hit 9.0%, a new series high. Conversely, households’ perceptions of their current and future financial situations deteriorated in May.
Americans’ diminishing purchasing power is reflected in U.S. households’ record-low personal savings rate. Personal savings as a percentage of disposable personal income in April hit 4.4%, down from 6.0% in January. The figure is at the lowest level since September 2008, data from the Commerce Department found.
“Gas and energy prices play a huge role in the structure of the modern economy,” Chief Growth Officer at GETIDA Yoni Mazor told ConsumerAffairs. “The prices of driving cars, booking flights, shipping products, and much more get greatly affected by the rise of gas prices. This is definitely contributing to the overall level of inflation and hits the pockets of consumers and their daily spending in many ways.”
The news follows recent data from the Labor Department that showed consumer prices accelerating at a record pace of 8.6% over the year in May.