In my opinion, the impact of inflation on household savings could be negative if the increase in goods on the market is uncontrolled, thereby reducing purchasing power. However, inflation can have various impacts on society, both positive and negative, depending on a number of factors including the level of inflation and the industrial sector.
its always the purchasing power that plummets and yet people just overlook it, the inflation affects heavily on household saving even more apparent with the monthly spending of a household its not rare that nowaday people hardly save money because they struggle to make ends meet.
so it does have negative impact but good thing world economic condition has been getting better since pandemic now most of inflation rate also keeps up with salary growth but we definitely not talking about blue collar job with stagnating income, the government really need to look into that.
makes me wonder if the average household could overcome this, investing won't be any better either, since its mostly time constraint and most of household can't afford their money locked for period of time, also APY sometime doesn't really outweigh inflation even if we invest in the high performing investment, the investment that has higher APY always carries risk, most household also can't risk of losing money and then become homeless.
those definition above is good to understand how purchasing power is the one that got affected most, but finding solution is also hard thing.
the fact that based on your study mentioned that lower income household having hard time saving means they are just few steps away from poverty.
It is true that many households cannot overcome this situation easily, especially since long-term investments are not always a realistic solution. Limited time and funds, coupled with the risk of losing capital, make many households reluctant to lock up their money in investments where returns are not guaranteed.
A high annual interest rate (APY) often comes with significant risks. This means that even though the potential profits are greater, the potential losses cannot be ignored either. For households with limited incomes, the risk of losing money can have serious consequences, even causing them to fall into poverty.
Additionally, inflation is an important factor to consider. Even though there are investments with high APYs, if inflation is also high, the real return on those investments can be very small or even negative. This makes the situation even more difficult for low-income households
trying to maintain or increase their purchasing power.
Indeed, as mentioned, understanding how purchasing power is affected is a good first step. However, finding practical solutions is a big challenge. Policies that support cost-of-living savings, such as energy subsidies, food assistance, or affordable housing programs, can help ease the financial burden on housing.
Apart from that, financial education and access to more affordable and low-risk financial products can also be a long-term solution. Providing access to information and tools that help households better manage their money can make a big difference.
In conclusion, the problems faced by low-income households in dealing with inflation and investment risks are complex and require a multifaceted approach. Policy support, financial education, and innovation in financial products all need to play a role in helping these households maintain their financial stability and avoid poverty.