Why are savers and people on fixed incomes more negatively affected by inflation?
Answer (1)
Savers and people with fixed incomes suffer more during inflation because their money loses purchasing power—it buys less than before.Negative Effect of Inflation to Savers/Peoples on Fixed IncomesLet’s start with savers. Imagine a student saves ₱1,000 in a piggy bank or a regular savings account that gives only 1% interest. If inflation is 5%, the real value of that savings is reduced. Even if you earn ₱10 in interest, the prices of goods may have increased by ₱50. This means you can now afford fewer items than when you first saved the money.Now consider someone living on a fixed income, like a retired lolo or lola receiving a monthly pension of ₱6,000. If food, medicine, and utility prices go up because of inflation, but their pension stays the same, they will struggle. A ₱6,000 pension that used to cover one month of basic needs may no longer be enough. They will either reduce their consumption or fall into debt.This problem also affects people on fixed scholarships, allowances, or minimum wages that don’t adjust regularly. If inflation rises but their income stays the same, they are forced to make sacrifices—skipping meals, canceling internet subscriptions, or walking long distances to save on fare.Meanwhile, people with assets like land, real estate, or stocks can sometimes benefit from inflation, because the value of their investments may grow. But those who only hold cash or rely on set monthly payments usually suffer the most.In the Philippines, many retirees don’t have inflation-protected pensions, so they are among the hardest hit when inflation increases. This is why the government sometimes provides additional ayuda or cost-of-living adjustments (COLA) to help protect these groups.
