How To Prepare for Inflation as a Young Adult

how to prepare for inflation as a young adult

Adulting through a recession is no fun task, especially for young adults who are graduating and entering the workforce. Times of high inflation can often be a precursor to an upcoming recession, especially if the FED misses its mark with interest rate hikes. But let’s put the ifs and maybes aside and talk about ways that you can prepare for inflation as a young adult.

Let’s start off by making sure that everyone understands what inflation is exactly.

What is inflation?

Inflation is the general term for the increase in prices for goods and services in an economy. In other words, you are losing purchasing power. So, you can buy less today than you could a year ago with the same amount of money.

Essentially, you can buy less food now with the same $50 dollars as you could a year ago.

For example, I am a lover of Trader Joe’s blueberry muffins. I buy them often, and I mean often. A year ago, these muffins cost $3.49. Today, those same exact blueberry muffins cost $4.49. So, I now must pay more to receive the exact same good.

Admittedly, this is a large simplification of inflation but it serves its purpose of explaining how it works.

Now to be clear, we want inflation to happen. The general consensus is that 2% inflation is the sweet spot and it is a sign of a growing economy. That’s a good thing.

However, as you have probably heard we have soared past that 2% year-on-end increase with an 8.5% increase from last year. Check out the graph below depicting this change.

prepare for inflation

The questions that are going around now are what will be done to curb this rising inflation? Are we going into a recession? How high will it go before peaking? And that’s not really even the tip of the iceberg.

Why Does Inflation Matter?

Inflation matters because it affects your day-to-day transactions, from gas to how much we can put away for retirement each month.

As a young person who is just now starting to make “real money” for the first time, we have to make sure we are maximizing every dollar we earn.

Inflation can be considered Tax’s older and uglier step-brother who’s away at college. When he comes home for the holidays, he is a menace and jerk to everyone around him. He just sucks. So, we look forward to the briefness of his stay.

How to Prepare for Inflation As A Young Adult?

Sadly enough, inflation is already here. Whether it is transitory or not doesn’t really matter for your bottom line in the short term.

So, as the saying goes the best time to do something is yesterday. The second best time is today. So, let’s talk about what you can do to prepare for inflation as a young adult.

Ideally, you want to focus on attaining assets that are inflation-friendly meaning they either track inflation or have a track record of out-performing inflation.

The overall goal should be attaining inflation friendly assets and using those assets to get more assets.

Read More: 16 Personal Finance Terms Every Adult Should Know


I-bonds are the talk of the town currently and for good reason. I-bonds are inflation-protected bonds issued by the U.S. Treasury.

There are two main reasons I-bonds are a strong asset for young adults. Be aware, though, that there is a lot more to I-bonds than I get into in this post. Of course, nothing here is financial advice. Always do your own research and make your own, informed decisions.

If you want to learn more about I-bonds you can do so here.

So, let’s talk about these two reasons.

I-Bonds are risk-free

I-bonds are made to follow the interest rate, so it mitigates much of the loss you would incur at the expense of inflation. Plus, they are backed by the U.S. Treasury. So, unless society implodes you will be getting your money back.

And if society does implode, well I-bonds would be the least of all of our problems – joking not joking.

I-Bonds Are Flexible

They are flexible to the changing standards of your life. Meaning you can cash in on those bonds at any time after their 1-year lock-up period.

A really helpful use of I-bonds is using them as a place to hold your emergency fund during times of high inflation. For example, if you go the usual route and put the money into an HYSA that money is not protected against inflation. So, you are losing purchasing power as your dollars are able to buy less.

If you use I-bonds as your vehicle to hold your cash, you are ensuring that your emergency fund is keeping up with inflation. Therefore, it does not lose as much purchasing power.

I do want to note that only individuals can hold I-bonds. They can’t be held in a fund.

Additionally, I-bonds are issued directly from the federal government. They are entirely separate from the stock market.

Maximize Retirement Savings as a Young Adult

Prioritize retirement. Invest and chill. Put your money into ETFs or mutual funds and let it sit until retirement.

Maybe be the guy that tells everyone to VTSAX and Chill.

Either way, you want to maximize your Roth IRA, 401(k), HSA, and whatever else you can. This helps ensure that your money at least has a chance to work for you in the long-term rather than lost to inflation in the short term.

That’s at least my plan to help curb the effects of inflation. Again, not financial advice.

Seek Opportunities To Decrease Liabilities

Just as it’s important to seek a higher-paying job as things are becoming more expensive, it is also important to decrease unnecessary liabilities.

Simply put – the more you pay, the less you have. If you spend money on a lot of things and those things increase in price – well, you are now spending more money overall.

Only you know what can be truly let go to help your budget without destroying your lifestyle. That’s a personal decision, yet it’s one that we might easily overlook.

I for one had to cancel my rock-climbing membership. Rest in peace to having shredded finger muscles.

But I digress.

Find ways to spend less. If you are someone that struggles with impulse buying check out this post for management tips.

Let me know in the comments how you plan to prepare for inflation as a young adult.

Best of luck adulting!

And Remember,

Adulting Starts Here

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