The United States of America has been experiencing inflation for many years now. Inflation is a measure of how prices of goods rise over a given period of time. Inflation is an important topic to discuss with teens as they begin to learn about the economy and how it works. Consumers will feel the impact of inflation most in the form of decreased purchasing power, meaning their money will buy less than it did before. Inflation can negatively impact people who are on a fixed income, forcing them to use their emergency savings and leading to financial insecurity.
Property owners can often benefit from the inflated prices, while buyers and renters face disadvantages due to higher prices. Years ago, COVID-19's economic downturn increased unemployment and led to excessive prices, potentially leading to increased costs for asset buyers and economic failure. This led to most people not having enough time to respond or save before inflation set in.
In Investopedia, author Michelle Ullman explains the 2021 process of inflation. “From there, inflation continued to surge. Overall inflation in 2021 was 4.7% and it reached a peak of 9.1% in June 2022” (Ullman, 2023). This shows how fast inflation can change from one year to the next. Jason Fernando, a financial analyst and author, researched inflation around the world and found that India's target is around 4% (with an upper tolerance of 6% and a lower tolerance of 2%), while Brazil aims for 3.25% (with an upper tolerance of 4.75% and a lower tolerance of 1.75%) (Fernando, 2023). Inflation caused people to choose needs over wants. Raul Rojas, a stock market investor, describes his experience with inflation. “Inflation has infected my daily life. It affected purchasing goods that I needed and gas which peaked at 6 dollars a gallon at one point. It drastically affected my financial planning for my future.” Teens who work are also being affected. Chicago student Alejandro Maldonado expressed, “I’m barely starting and I see that money doesn’t last forever, waste only on one thing and it goes away like that.”
Inflation exists. It is highly advisable to have an emergency savings of at least 6 months as inflation can surprise us. The economy's unpredictable nature means that it's crucial to prepare for changes in prices, as our purchasing power may fluctuate from one year to the next.
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Student: Alejandro Maldonado
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