I teach an undergrad class in which we discuss financial concepts. I'm trying to think if my standard advice would shift at all given we are in a period of high inflation. Any thoughts? Note this is advice for people just starting out. All I can come up with is:

You might have better luck finding a high interest savings account to put your emergency fund in
Car loans and mortgages will be more expensive than they once were. Be more aware if you take out an auto loan what the true cost is – try to use more cash down.
If you take out a mortgage, think about refinancing as soon as (if) the rates come down.

I think my long term investing advice (try to save 15%, invest in target date index funds, max out 401(k) or at least meet matching amount) will change. I don't see telling my students to invest in gold.

Any other suggestions?

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Mysunsai t1_iuj58m4 wrote on October 31, 2022 at 6:48 PM

None of that advice is different than you would give in any other period. You would still pick high interest savings for your emergency fund. You would still be aware of the true cost of cars and out more down if the financing price is too high. You would still refinance your mortgage if rates go down.

Fundamentally, there is no change in financial advice between high inflation or low inflation or deflation, because none of those are controllable through your personal financial choices. They just happen.

gkr974 OP t1_iuj6bqa wrote on October 31, 2022 at 6:55 PM

Fair points. Though in the past, "high interest" savings accounts sometimes meant 0.1% interest. I'm just checking my presumption that there isn't really different advice to give, which seems to be the case.

AdditionalAttorney t1_iuj5ubv wrote on October 31, 2022 at 6:52 PM

I’d teach them the prime directive flow chart. At least so that they’re aware it exists. But that’s not inflation specific.

To me the inflation specific advice may be to not pay a mortgage off sooner than needed, especially if your rate is low.

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No_Tension_280 t1_iujjlup wrote on October 31, 2022 at 8:25 PM

Don't spend unnecessary money and live below your means. Every coffee company, music streaming service, 'phone/device' store, and other online store is trying to separate you from your money. RESIST!

meamemg t1_iuj6g3t wrote on October 31, 2022 at 6:56 PM

I think it is important to talk about inflation currently/recently in a nuanced way. We've seen periods of high inflation before. What made the recent/current period different, is we had negative real interest rates. That is, bank rates didn't go up to match inflation. But like you said, it doesn't change too much of the standard advice.

Liquidretro t1_iujalwg wrote on October 31, 2022 at 7:24 PM

I think the big thing to stress is, this isn't a time to freak out and completely change your behavior. The basic rules still apply, and it's likely to be a temporary period of inflation, especially the one we are in currently with the fed raising rates to slow down inflation. A historical approach too is important, especially for younger people who have never seen anything like this and think the sky is falling. You see it here with first time homebuyers who can afford a house but are not buying because they think rates are "too high".