The Effect of Inflation on Family Finance

You must be familiar with the term inflation. The phenomenon that occurs to a country's economy is often mentioned in various media, from television, online videos, to hot conversations on social media. However, what is inflation, and how does inflation affect family finances? Check out the following explanation.

What is Inflation?

Quoted from an article published by a website owned by Bank Indonesia, inflation can be interpreted as an increase in the prices of goods and services in general and continuously within a certain period of time.

Inflation can be caused by various factors. The Ministry of Finance, on its website says that there are several factors that can cause inflation, namely the existence of a higher than usual demand for an item or service that makes the price of the item or service increase.

In addition, inflation can be caused by an increase in production costs, an increase in the amount of money circulating in the community, as well as an unbalanced amount of demand and supply.

Read also: The Role of Women in Family Finance

The Effect of Inflation on Family Finance

Although inflation is usually caused by the economic situation of a country as a whole, its effects or effects will certainly be felt by most people. Its effect on family finances can be explained by the following example.

In 2010, or maybe before, do you remember what you could buy for your family at the supermarket for Rp. 100,000? How about you compare it to now? 

If you remember, you will imagine how much Rp. 100,000 could fill your shopping cart in 2010. Meanwhile, now maybe the number of items you will get with that amount of money is less than what you could buy before. 

Another example is if you usually eat certain foods or drinks, such as a serving of chicken noodles, do you remember how much it cost in 2005, 2010, and 2015? How about the price now? Of course, now a serving of chicken noodles is more expensive than in previous years, although it has only increased slightly.

Therefore, the effect on family finances is that the purchasing power of a family to meet their daily needs, ranging from food, clothing, health, and so on, continues to decrease. 

It sounds scary, but is there a way around it?

How to Deal with the Impact of Inflation on Family Finance

There are several ways that you and your family can do to reduce the impact of inflation on family finances. In short, by having a good monthly budget plan, you can maintain the financial health of your family even during times of inflation. Check out the explanation below!

1. Create a Monthly Budget

The monthly budget you create will contain the income and expenses that your family has. You can calculate how much money comes in, how much is used for the family's monthly needs, how much is saved, and how much goes into the emergency fund. 

That way, you will have a clearer picture or image of your family's financial situation, and can allocate, reduce, or manage the necessary funds when inflation occurs.

2. Understand and Monitor State Finances

That doesn't mean you have to be a state finance expert. It's just that, it's better if you and your family are sensitive to the state's financial situation, even if it's just the basics.

So, you can prepare funds and other important needs when inflation comes, and your family will be ready when the goods or services needed increase in price.

3. Create an Emergency Fund

By having an emergency fund, you will have safety net which you can use when family expenses become more expensive than before. 

As the name implies, emergency funds should only be used in an emergency and should not be touched when not really needed. Therefore, it is better to save your emergency fund in another savings account and not combine it with the accounts you use every day

4. Saving

Of course, saving is also an important aspect that you and your family can do to prepare for inflation. With regular savings, you and your family will have more money saved when you need it. 

However, unlike an emergency fund, your savings really shouldn't be touched for daily needs, because each savings has its own purpose and purchase target, either in case a family member falls ill, or other needs.

This is an explanation of inflation and how to deal with it so that your family's finances are not disrupted and yet stable. To help you manage your family finances, the Whiz finance app will make it easier for you to manage your finances!

So, what are you waiting for? Feel the ease for your finances by using Whiz!