Inflation is a big word that sounds pretty intimidating, but the basic definition is this: an increase in the prices of goods and services.
Like most things in life that require moderation, inflation is actually a good thing in a certain amount. The Federal Reserve, the central bank of the United States, usually aims for a target inflation rate of around two percent. This type of moderate increase is normal and actually means the economy is healthy.
However, between September 2021 and September 2022, the annual U.S. inflation rate hit 8.2 percent. What this means for everyone is that it costs more to buy many of the same products than it did a year ago.
There is not one simple reason that inflation happens, but there are three main categories of explanations. The first is when the supply
of products or services can’t keep up with demand and companies raise prices because some people are willing to pay more. The second happens when the cost of making products or providing services goes up and businesses raise their prices to keep making money. The final category is built-in inflation, meaning that workers need to make more money to keep up with rising living costs.
So now that you know what it means, the question becomes what can people do? It’s certainly not your job to worry about these things, but you may hear the adults in your life talking about ways to cut costs and save a little money. This can be disappointing and scary, but it may be helpful to understand some good options.
One STRATEGY for many families is to reduce spending on non-essential items: visiting the local library, organizing clothing and toy swaps with friends and neighbors, and taking shorter or more local vacations are all places to start. Food is an area where many families spend a lot and small changes can help you save. Making pizza at home instead of ordering out, sticking to a meal plan to avoid wasting leftovers, and swapping fresh fruits and vegetables for canned or frozen can all add up. Many of these have the added benefit of being good for the environment as well!