Inflation Is Deflating the Financial Goals of All Consumers

Inflation is not only making life costly, it’s undercutting the financial goals of consumers.

With the new year just around the corner, many U.S. consumers are looking ahead and setting financial goals.

However, the economic headwinds of the past 12 months have severely buffeted their confidence and spending power. Inflation in particular is eating away at consumers’ paychecks and putting them well behind on their financial goals.

That’s according to PYMNTS’ special edition December release, “New Reality Check: The Paycheck-To-Paycheck Report,” which found that one in three consumers are not currently saving money. Additionally, 60% of those consumers who aren’t saving indicate they have no pre-existing savings.

Low-income consumers are the hardest hit of all, with fully half of financially struggling consumers finding themselves unable to save and reporting that they have no savings. Compounding matters, financially struggling consumers are also the most likely to lack both long-term and short-term financial goals.

More than a third (36%) of all U.S. consumers have not identified short-term financial goals, and that percentage rises slightly to 38% when consumers are asked whether they’ve defined their own long-term financial objectives.

The most common reasons U.S. consumers say they are saving for the long-term includes planning for retirement and cover unexpected emergencies.

Generation Z, for whom starting to save now would later pay off the most, tend to be more focused on their short-term goals versus thinking ahead to retirement. Three-quarters (76%) of Gen Z consumers have identified short-term objectives, while 34% have not yet made any long-term financial goals.

For 25% of financially struggling consumers, paying off debt is their most important long-term goal.

Generation X, baby boomers, seniors, and consumers who are married but do not have children are being harder hit than most by economic realities of the past year.

To be sure, while headline inflation has declined from summertime peak levels, it remains a consistent and pervasive economic headwind that is simultaneously weakening spending power while drastically impacting consumers’ ability to save and plan. With the new year projected to bring continued economic challenges, time will tell how the average American will adapt.

For more information on consumer sentiment and what it might mean for your organization, download the free PYMNTS study, “New Reality Check: The Paycheck-To-Paycheck Report.”