Rising Inflation and High Interest Rates Drive Urgency to Save amid Holiday Spending
As the holiday season approaches, consumers are facing the challenge of rising prices and the temptation to save more money. Despite the recent increase in inflation, the cost of goods remains high, and the Federal Reserve’s decision to raise interest rates has made saving more appealing than ever.
With interest rates at their highest point in two decades, every dollar spent today could mean missing out on potential returns of up to 5% from savings avenues like savings accounts, certificates of deposit, and bonds. Additionally, borrowing has become more expensive, with credit card rates sometimes reaching as high as 30%.
Experts in finance and behavioral economics are strongly encouraging the public to prioritize saving, especially considering the expected rise in consumer spending during the holidays. In order to combat overspending, financial experts recommend conducting a comprehensive review of past holiday expenditures and planning for all holiday expenses in one go. Matt Fizell from Harmony Wealth suggests analyzing bank and credit card statements to identify and cut unnecessary costs.
Open communication about spending limits with friends and family is another effective strategy. Lauren Mathews Fairey, a financial educator at WealthWave, emphasizes the importance of these discussions.
Investors should keep an eye on stocks and ETFs closely tied to consumer spending trends and credit card usage. Some examples include Visa Inc. (NYSE: V), Mastercard Inc. (NYSE: MA), SPDR S&P Retail ETF (NYSEARCA: XRT), and Vanguard Consumer Discretionary ETF (NYSEARCA: VCR).
In summary, rising inflation and high interest rates have created an urgency for consumers to save amidst holiday spending. By reassessing past holiday expenditures, cutting unnecessary costs, and openly discussing spending limits, individuals can better manage their finances during this festive season.
This content has been produced and reviewed by Benzinga editors, and partially generated with the help of AI tools.
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