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Rising costs affect everyone, but some more than others.

Key points

  • A National Retail Federation report found that 36% of households earning $50,000 or less use savings to cover expenses.
  • Those earning $100,000 or more must also dip into emergency funds.
  • Nearly one-third of low-income households take on debt due to inflation, while only 7% of households over $100,000 take on debt.

Everywhere you look you can see the symptoms of our current inflation crisis. Everything is more expensive, from groceries to housing and everything in between. And while workers have finally gained the upper hand in many industries, wages are still as stagnant as they have been for the past decade.

American consumers have taken many measures to try to keep their finances afloat. Nearly half of shoppers have switched to cheaper alternatives, and generic/store brands are growing in popularity.

But even switching to store brands and downloading all the couponing apps can only go so far. This is demonstrated by the fact that a third of Americans dip into their savings to cover their expenses. That’s according to a survey by the National Retail Federation.

Nor are low-income households feeling the sting. Here’s how the numbers break down for people who rely on savings right now:

  • Households earning less than $50,000 per year: 36%
  • Those in the $50,000 to $100,000 range: 32%
  • People above $100,000 per year: 33%

Low-income households are also going into debt

Where you really see the difference income makes is when we start talking about debt. Almost a third (32%) of those earning less than $50,000 say they have to borrow money and/or go into debt to make ends meet.

Conversely, this share drops to 13% for households whose income is between $50,000 and $100,000. And it drops to just 7% for households earning $100,000 or more.

A big part of the difference is probably how much these families save before inflation sets in. According to research by The Ascent, in May the median savings account balance in the United States was around $4,500. But that’s the median number — meaning half of Americans had much lower balances in their savings accounts.

In fact, a Federal Reserve report from around the same time concluded that more than a third of Americans lacked an emergency fund capable of covering an unexpected $400 expense. With that in mind, many people may not even have any savings to tap into at this point, making debt the only option.

People in the higher income brackets likely started the summer with larger emergency funds, as well as better-funded savings accounts in general. Bigger cushions mean they can withstand the forces of inflation much longer before having to rely on debt to cover daily necessities.

Cheaper brands, coupons and sales

Another thing that can help people in higher income brackets spread their savings more is that they might have more wiggle room in their budget.

Low-income households already on a tight budget don’t have much leeway to make cuts. On the other hand, those who make more money probably have unnecessary expenses that can be cut before they have to ax something vital.

Similarly, households that bought generics and used coupons to make ends meet before inflation hit don’t have those ways to fall back — they were already using them. But those who could afford branded items and pay full price now have more ways to cut their budget.

And we are certainly seeing adjustments. In the National Retail Federation study, nearly half of US shoppers said they opted for cheaper alternatives for daily necessities. And almost as many are turning to coupons and sales more often than this time last year. There are also a large number of shoppers who embrace private label and frequent discount stores.

If inflation continues, all bets are off

Although those with higher incomes may avoid going into debt for the time being, even their larger savings reserves won’t last forever. If inflation continues at the high rates we’ve seen this summer, even those in the over $100,000 income brackets could start to run out of options.

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