Inflation has cooled from its 2022 peak, but it’s still higher than what many Americans grew up with. As of late 2025, prices for essentials—housing, insurance, groceries, streaming, even tipping—remain elevated. If you’re saving and investing the same way you did five years ago, you may be quietly losing ground.
At ZMoney Finance, we think of inflation as a “silent tax” on your cash. You don’t see the charge on your bank statement, but your dollars buy less every year. This article breaks down how to protect and grow your money in a higher-inflation environment, with practical, no-nonsense steps you can implement this month.
To invest wisely during inflation, you need to focus on real return—your return after inflation, not just the number on the account statement.
Use this rough formula:
Real return ≈ Nominal return − Inflation rate
Examples:
If your savings account pays 4% and inflation is 3%:
Real return ≈ 4% − 3% = 1% (you’re just barely growing ahead of prices).
If your bond fund yields 3% and inflation is 4%:
Real return ≈ 3% − 4% = −1% (you’re actually losing purchasing power).
Action step: List your major accounts—savings, CDs, 401(k), IRAs—and write down both:
1) Current or expected annual return (after fees) 2) Current inflation rate you’re assuming (use recent CPI as a baseline)
Any investment with a negative real return should be treated as a short-term parking spot, not a long-term wealth builder.
Cash is safe from market swings, but not from inflation. The longer inflation stays elevated, the more painful it is to hoard excess cash in low-yield accounts.
General guidelines still hold:
• 3–6 months of essential expenses if you’re in a stable job • 6–12 months if you’re self-employed, in a volatile industry, or have dependents
But in 2025, those “essential expenses” are larger than they were in 2020. Many people haven’t updated the number.
Action step:
1) Recalculate your current monthly essentials: rent/mortgage, utilities, groceries, transportation, insurance, minimum debt payments. 2) Multiply by 3–6 (or more, based on your risk tolerance and job stability). 3) Keep that amount in high-yield savings or a money market fund. 4) Invest anything above that target for long-term goals.
Don’t settle for 0.01% in a big-bank savings account. Online banks and brokerages often offer competitive yields on:
• High-yield savings accounts • Money market funds • Short-term Treasury bills (via brokerage or TreasuryDirect)
The goal isn’t to beat inflation with cash; it’s to lose as little as possible while keeping money safe and accessible.
Over long periods, the stock market has historically outpaced inflation. But certain assets tend to handle inflation shocks better than others.
Companies that can raise prices without losing customers help shareholders keep up with inflation. Think:
• Strong-brand consumer companies • Essential services (utilities, telecom, some healthcare) • Certain technology and software providers with “must-have” products
Practical approach for most investors: use low-cost index funds or broad ETFs (U.S. total market, S&P 500, and diversified international funds) instead of trying to pick individual winners.
TIPS (Treasury Inflation-Protected Securities) adjust their principal based on CPI. When inflation rises, their principal value increases; interest payments rise with it.
You can access TIPS via:
• TIPS mutual funds or ETFs in your 401(k) or IRA • Direct purchase from TreasuryDirect.gov (more hands-on, less flexible)
Adding TIPS can make sense for:
• Retirees needing inflation-adjusted stability • Conservative investors who still want some inflation protection
Real estate and commodity-related investments can sometimes benefit when prices rise.
REITs (Real Estate Investment Trusts): • Own or finance income-producing real estate • Often pass rental income to shareholders as dividends • Can benefit if rents rise with inflation (though sensitive to interest rates)
Commodities & commodity producers: • Energy, metals, agriculture • Highly volatile and not guaranteed inflation hedges over short windows • Usually best used as a small satellite allocation, not the core of your portfolio
Keep any “real asset” slice modest (often 5–15% of a long-term portfolio, depending on risk tolerance and age).
Inflation and interest rates are intertwined. Even if the Federal Reserve pauses or cuts rates, the era of ultra-cheap money is likely behind us. That means your debt strategy matters more than ever.
Inflation does not “help” you if your credit card charges 22% APR. That’s far above any realistic inflation rate or investment return.
Action step:
• List all debts: balance, interest rate, minimum monthly payment • Attack anything above ~7–8% APR aggressively (credit cards, personal loans) • Consider a 0% balance transfer card or a lower-rate consolidation loan if you can commit to a payoff schedule
If you have a variable-rate loan (HELOCs, some private student loans, business credit lines), rising rates can make monthly payments jump.
Consider:
• Refinancing variable-rate loans into fixed-rate loans if the math works • Keeping HELOC use planned and limited, not a default spending source
Meanwhile, if you already locked in a low fixed mortgage rate in 2020–2022, that’s a powerful inflation shield: your payment stays the same while wages and rents around you rise.
Inflation isn’t just an investment problem—it’s a cash-flow problem. Your budget should evolve with price levels, not stay frozen at last decade’s numbers.
Once a year (at minimum):
• Pull 3–6 months of spending data from your bank and card statements • Adjust your budget categories to reflect reality, not intention • Specifically watch housing, insurance, groceries, and subscriptions—these have seen persistent increases
Then decide intentionally: where will you absorb inflation by cutting, and where will you accept higher spending because it matches your values?
In a higher-inflation world, saving a flat dollar amount each year isn’t enough. When your income jumps:
• Direct a fixed portion of each raise (say, 50%) to your 401(k), Roth IRA, or brokerage • Use the remaining portion to offset higher living costs and modest lifestyle upgrades
This “raise capture” habit quietly pushes your savings rate higher without feeling like a massive sacrifice.
In 2025, simply “saving in a bank account” is not a complete financial plan. High and sticky prices mean you must:
• Track your real returns, not just headline yields • Keep a right-sized emergency fund in high-yield cash, not bloated low-interest balances • Allocate more to diversified stocks, TIPS, and selected real assets for long-term goals • Eliminate high-interest debt before it erodes your future • Regularly update your budget and capture pay raises for investing
Inflation is a permanent feature of the financial landscape, not a temporary glitch. Treat it as a design constraint for your money, and your future self will still be able to afford the life you’re working for today.