Just How Much is Inflation Costing Depositors? Here’s What 1 Analysis Shows

NEW YORK–A new study offers insights into just how much inflation is costing depositors when it comes to their funds in interest-bearing accounts.

The latest MagnifyMoney study examined personal and online savings, standard and reward checking, money market and certificate of deposit (CD) accounts — as well as the largest exchange-traded funds (ETFs) — to see how they fared during the 12 months ending March 31, 2022.

Among the findings, according to MagnifyMoney:

1. Consumers are undeniably feeling the effects of inflation, starting with personal savings accounts. “Americans who put $100 into one of these a year ago (April 1, 2021) would have lost the equivalent of $8.41 to inflation by March 31, 2022. This is due to a tiny 13 cents in compound interest and an 8.54% increase in the consumer price index — which tracks the changes in prices paid for goods and services — in that period,” the report stated.
2. Standard checking account holders lost the most, while rewards checking account holders lost the least — but still a lot. “Money in standard checking accounts saw the biggest drop — $8.45 for every $100 deposited — while rewards checking had the best outcome among personal accounts at a still-bad loss of $7.11. However, consumers have lost more if they didn’t do what was required to waive fees.”
3. Consumers who put their money in CDs fared about the same. “Someone who rolled over a three-month CD four times would have lost 8.40% to inflation after one year,” MagnifyMoney stated. “A six-month CD rolled over once and a one-year CD would have resulted in an average loss of 8.31% and 8.18%, respectively.”
4. Adding money to ETFs would have been a better bet — in some cases. “Analysts looked at the five largest ETFs at the start of the second quarter of 2021, and only one of them lost money in a year. But it lost a lot — the equivalent of $23.26 for each $100 invested after losses and expense ratios (fees),” according to the analysis. “However, two ETFs based on the S&P 500 left investors with 4%-plus more, even after inflation and fees.”
5. U.S. households spent an average of $61,334 in 2020, which means they would have needed $15,334 in an emergency fund to fully fund three months of expenses in early 2021. “A household with that fund in a personal savings account would have to add $1,290 to cover the same expenses as of April 2022, or $1,239 if they’d used an online savings account. That amount increases by $430 or $413, respectively, to fund an additional month of spending.”

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