Category Saving

Despite rising prices for basic needs like housing, healthcare, and food, many middle-class Americans are finding ways to save for retirement. A new study from Principal Financial Group shows that 80% of middle-income earners are saving money for their future, even while inflation and high interest rates impact day-to-day living. On average, they’re saving around 8% of their income. This positive trend is happening because more people are learning how to manage money better, cutting back on unnecessary spending, and focusing on long-term goals. Many of these habits were strengthened during the COVID-19 pandemic, when people became more aware of the importance of financial security.

As the Federal Reserve prepares for its July 2025 meeting, many Americans are rethinking how they spend and save money. Because of ongoing inflation and uncertain political conditions, the Fed is expected to keep interest rates high. While this makes borrowing more expensive, it also means savings accounts are offering better returns—with some paying up to 5% interest. However, these high rates often come with rules, like minimum balances. With prices still rising, especially on everyday items, families are cutting back on non-essential purchases and focusing on building emergency savings. Seasonal spending—like back-to-school shopping—is also changing, as more people look for ways to stretch their dollars further in this tough economic environment.

As the Federal Reserve prepares for its upcoming meeting on July 29-30, interest rates are expected to remain steady despite ongoing economic challenges like inflation and global trade tensions. This stability is good news for savers, as high-yield savings accounts (HYSAs) continue offering some of the best interest rates seen in years—some close to 5%. While these accounts can help protect savings from inflation and grow money faster than traditional savings accounts, it's important to know that banks often set rules, like balance limits or specific requirements to earn the highest rate. Overall, it’s a strong time for households to take advantage of these elevated rates to maximize their short-term savings.

In 2025, rising inflation is putting serious financial pressure on American seniors, especially those living on fixed incomes like Social Security. Everyday costs—like healthcare, rent, and transportation—have climbed faster than retirees' benefits, causing their money to stretch less than it did just a few years ago. Since 2010, Social Security’s buying power has dropped about 20%, and cost-of-living adjustments still aren’t keeping pace with real inflation. As a result, many older adults are cutting back on non-essential spending, like dining out or traveling, and focusing more on saving money where they can. This change in spending habits is also creating new investment opportunities for retailers and businesses that cater to budget-conscious seniors.

Retiring today is harder than it used to be, mostly because prices are going up and it costs more to buy a home. Many older Americans who planned to sell their houses and use that money in retirement are finding it difficult to do so: high mortgage rates are slowing home sales, and buyers are struggling to afford record-high prices. At the same time, inflation—while not extreme—is still enough to eat away at people’s savings over time. For example, an average 3% inflation rate each year could end up nearly doubling a retiree’s living costs over 25 years. Because of this, financial experts are encouraging people to budget more carefully, stay flexible with spending, and rethink how they save and invest for the future.

Planning for a strong retirement is more important than ever, especially with rising inflation and uncertain markets. To end up in the top 10% of retirees financially, experts say it's smart to start saving and investing as early as possible—this allows your money to grow more over time thanks to compound interest. But even if you're starting later, you can still make up ground by making bold choices, like saving more, cutting unnecessary spending, and using special tax-friendly accounts like 401(k)s, IRAs, and HSAs. With possible changes to retirement tax rules coming from Congress, taking full advantage of these tools now can help you build a more secure future.