How Inflation Impacts Your Financial Goals—and How to Prepare

With inflation impacting daily living expenses, it can be tempting to delay long-term goals, but building an inflation-resistant strategy is one of the best ways to stay ahead. Here’s a breakdown of how inflation affects specific financial goals and some steps you can take to mitigate it. 1. The Impact on Retirement Savings   – Over time, inflation can significantly erode the purchasing power of retirement savings. For example, if inflation averages 3% per year, the value of a dollar could be cut in half in 24 years. To combat this, consider investing in assets that have historically outpaced inflation, such as stocks and real estate. 2. Higher Costs for Education and Housing   – If you’re saving for a child’s education or a down payment on a home, inflation may increase these expenses faster than your income grows. Saving more aggressively early on, using 529 education accounts, or investing in real estate early on may help combat these rising costs. 3. Cash and Emergency Funds   – While keeping a cash reserve is an essential part of good financial plan, inflation reduces the purchasing power of cash over time. Consider keeping your emergency fund in a high-yield savings account to partially offset inflation while maintaining accessibility. The amount of an emergency fund will differ for each household. Keeping inflation in mind when planning finances allows you to structure your portfolio with growth potential in mind, balancing security with appreciation over time.