Inflation Hitting Those Under 40 and the Old Hardest

It seemed that turmoil was short-lived in the financial markets as stocks shot up impressively last week. Unfortunately, so did U.S. inflation data.

The Producer Price Index (PPI) released on March 15 indicated that final demand prices moved up 10% for the 12 months ending in February of 2022.

The pain rising prices brings impacts all areas of our nation's economy. Many of the goods and services with the largest price hikes are those essential to most, if not all, American lives.

Pandemic-era inflation has set in for crucial sectors, from used cars, hotels, and furnishings to critical necessities such as gasoline, housing, rent, and groceries.

The latest data does not indicate any signs of a slowdown in price hikes we now endure. 

While the Russia-Ukraine conflict may not be responsible for skyrocketing housing, rent, or a double digit rise in food or clothing, there is little doubt that a 50% increase in energy costs is related.

What will happen to wallet-conscious Americans as the prices of these staples keep rising?

Many older Americans have been accustomed to living on fixed incomes for years in a pre-inflation world.

But even in a low-inflation environment, older Americans encountered new expenses that created an unexpected strain on finances: caregiving, assisted living, and nursing home costs.

That personal and family burden is only going to increase now that food, energy, housing, and health care costs are going up.

And what about our younger generations, who have struggled for decades with ridiculously high college tuition costs and student debt burdens?

Millennials and Gen Z were youngsters when they lived through the stressful 2008-2009 financial meltdownn. Now, they want to grow their families, become homeowners, and purchase big ticket items like cars and furnishings.

But they are also bumping up against unaffordable housing and exorbitant living costs; reflective of prices frankly showing no sign of abating anytime soon. This puts them at a particular disadvantage relative to previous generations in building wealth through homeownership.

How we stabilize inflationary pressures is a big question for the Biden administration.

The Federal Reserve has responded by raising interest rates to slow spending. But it seems that administration priorities are still elsewhere — climate change and green new deal energy dreams among them. These climate visions continue to be stubbornly disconnected with the reality of how our economy operates.

As an example, consider that in the U.S. there were 289.5 million registered cars in 2021 versus 2.32 million highway legal plug-in electric cars.

So gasoline prices will remain a consequential — to put it mildly — part of every American household and small business budget for the foreseeable future .

Time and again, Americans tell pollsters that their top concerns are economy, inflation, and COVID policies, not climate change.

This does not mean that Americans do not care about a clean energy future — it simply means that the innovative technology transition to make this pivot possible does not yet exist on a cost efficient scale.

While there are no easy fixes to deal with the current inflationary environment, the challenges we now face demonstrate more than ever the need for proper financial literacy.

Starting with students and young people, their grasp of savings, credit, interest rates, investing, and risk assessment may be particularly low.

This unawareness is dangerous and can lead to long term financial missteps now that Americans under 40 are experiencing the highest inflation of their lives.

There are currently 23 states requiring high school students to take a personal finance course. Gov. Ron DeSantis, R-Fla., is getting ready to approve a bill requiring students to take a full semester financial literacy course prior to graduation.

We need to make the directive of teaching essential money skills a 50 state priority if we want to better prepare our younger generation not only for volatile times, but also prepare them for paying for their lives ahead.

Clara Del Villar is Director of Senior Initiatives at FreedomWorks Foundation. Her financial industry career included senior roles in Investment Management, Private Asset Management, and Capital Markets. Her entrepreneurial ventures involved digital media as Founder, CEO of The Hispanic Post; energy tech as founder of InEnergy and health tech. She is a former adviser at 60 Plus Foundation. Currently, she is a Board Director at General American Investors Co. and Executive Committee of Weill Cornell Women's Health Symposium. She earned a BSFS at Georgetown University. Read Clara Del Villar's Reports — More Here.