By The Research Team
Dear Startup Investor,
When the Federal Reserve announced a 25-basis-point hike to interest rates last week, we knew it was just the tip of the iceberg
The Fed is desperate to throw cool water on the red-hot U.S. economy, and tamp down prices running at 40-year highs. That means the Fed will raise rates at least four more times in 2022, and a further two hikes are at least on the table.
That’s going to cause some market volatility, and take the wind out of a lot of stocks’ sails. Strong medicine, though; nobody likes paying $5 a gallon for gas or $10 for a banana (any Arrested Development fans here?).
But the process of getting there just got a little bit tougher for everyday Americans. After all, the pandemic spurred an increase in credit card spending – 30% of Americans used their credit cards more in the past two years.
Well, those balances, which were already on the rise due to inflation, will now surge further on a monthly basis in response to the interest rate uptick.
And consumers can expect those interest rates to be high for a while – the Federal Reserve anticipates inflation to remain above 3% through at least 2023.
So, record-high inflation and ever-increasing interest rates? But other than that, consumers must be feeling pretty good, right?!
Of course, the state of Americans’ finances is no laughing matter. The prospect of saving money to pay off debts or hit other financial targets remains an ever-more remote proposition.
As of 2021, 69% of Americans were saving 10% or less of what they make, and 21% weren’t saving anything at all.
Meanwhile, economists say that to retire at the age of 65 while maintaining your present standard of living, you need to save between 10-20% of your income.
Instead, 39% of Americans indicate they’re not only failing to save for retirement, they couldn’t even handle an emergency expense of $1,000 or more.
Put another way, nearly 40% of Americans are a busted furnace away from disaster.
The good news is, America is working the problem – and it isn’t just the Fed, but the private sector riding to the rescue.
Startups are front and center, devising new ways to ease the pains felt by consumers and help make them more financially solvent.
The Research Team