The Real Impact of Inflation on People Living With Low Incomes

By: Radha Seshagiri

Inflation is high and prices are skyrocketing. But for people with low incomes, inflation isn’t just a statistic — it’s a reality with devastating financial impacts.

In November 2021, The Boston Globe cited SaverLife research finding that people spent $96 more on groceries from one month to the next. For high-earners, this added cost might be a mere inconvenience. But for people living paycheck to paycheck, this noticeable increase can make the difference between being able to afford to feed their families or not.

As the Director of Policy at SaverLife, a nonprofit technology and advocacy organization helping families save money and build financial security, I see the direct effects of rising costs on our more than 600,000 members, primarily people with low incomes.

We found that members spent much more on basic necessities in 2021 vs. 2019, including 11% more on healthcare, 5% more on auto transportation, and 21% more on groceries.

Laurynn, one of our members, said that inflation is changing her ability to buy food and gas. She uses discount apps to find cheaper gas and has limited the meat and juices she buys for her family. Brittany says, “[Rising costs] make it hard for us to keep up with essential needs such as food and clothing.”

But our members aren’t just dealing with higher prices — they’re also dealing with lower paychecks. As many people returned to pre-pandemic work and spending levels, our members reported they were not making as much money as they did in 2019, impacting their ability to build a savings cushion and help them weather unforeseen financial circumstances like record-breaking inflation.

Our research demonstrates that even a savings amount as small as $100 can make a big difference for a person’s financial future. But rising costs make it harder than ever to save, especially for many low-to-moderate income families who are trying to provide for their families while making under $30,000 per year.

It is clear that people with low and moderate incomes experience price fluctuations more acutely than other populations. It is critical that decision-makers center these voices when addressing inflation and other macroeconomic trends to ensure financial security for all.