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Financial Literacy: How Having It Can Help Navigate Inflation

Financial Literacy: How Having It Can Help Navigate Inflation

March 29, 2023

At Alia Wealth Partners, we like to learn something new every day. Like, for example, your brain operates on the same amount of power as 10-watt light bulb. Talk about illuminating!

Sometimes we learn things that make us think twice.

The other day, for example, we read that 40% of Americans don’t have cash to cover an emergency expense. What’s more, 25% have no retirement or pension savings.

Our very aim at Alia is to keep you out of those dark spaces and shed light on financial literacy, or strategies and services that help you realize your financial possibilities.


Financial literacy means you possess the knowledge and skills to make smart decisions about your money. More than simply knowing stats and facts about money, financial literacy means you use your knowledge about money to make the right choices to achieve the best financial outcomes.

Financially literate people know their way around budgeting, emergency planning, debt eradication, risk diversification and retirement planning, among other strategies.

Unfortunately, more than one in three Americans are not considered financially literate, according to an Ipsos poll on behalf of Money Masters. Digging even deeper, financial literacy extends across all age groups, not just younger people. A growing number of senior households are more in debt today than in the past. A 2019 report found that the number of elderly households (65+) carrying personal debt has risen to more than 60%.

Being financially literate benefits all generations, especially as 30% of midlife adults provide regular financial support to their parents, according to a recent AARP survey. Additionally, about 40 million adults are actively caring for older family members as of 2020, a 20% increase from just five years earlier.

Stats aside, let’s focus on you.

Are you financially literate? Find out by taking this short quiz.

Now that you have a baseline, let’s delve deeper to boost your expertise or provide a refresher. Remember, financial literacy helps you achieve your financial goals and realize your life’s possibilities. It’s a tool to help you continue turning dreams into reality, no matter what twists and turns await, like our current rate of inflation.

Did you know?Inflation increased 6% in February 2023 from a year ago. Inflation is the rate at which the price of goods and services increases. It’s been driven, in part, by supply chain issues, pent-up consumer demand and economic stimulus from the pandemic.


Here are four strategies to help you stay the course through inflation.

  1. Continue investing.

Investing is the single most effective way to get rich. Inflation can be bad for individuals when you just keep your money sitting in a bank account and do nothing else with it.”

—Ramit Sethi, entrepreneur, author   

Avoid the urge to pull back on investing and hoard cash in lower-interest-bearing accounts, like savings or checking.

Instead, maintain a diversified investment portfolio of varied assets like stock funds and bond funds. This ensures that your exposure to any one type of asset is limited in the event of a downturn.

Consider, for example, Treasury Inflation Protected Securities, or TIPS, which are marketable U.S. Treasury securities aimed at combating purchasing power erosion. 

Or I-Bonds, which also are backed by the U.S. Treasury and tied to the Consumer Price Index. Their interest rate is adjusted every six months—in May and November—based on the rate of inflation and can be cashed out after a year.

Explore real estate and other commodities. Warren Buffett has highlighted real estate as a smart investment during inflation, which you may buy once and then get the rise in value. He’s also said businesses like utilities and railroads as not good investments during inflation.

With all that said, in inflationary times or not, Buffett also recommended refraining from picking individual stocks and instead going with an index fund, like the S&P 500.

  1. Pay as much down as possible on existing variable debt.

If you are financially secure and have three to six months’ emergency savings, prioritize paying down high interest debt. This includes credit cards, lines of credit, personal loans and variable-rate mortgages.

Remember: Since credit cards are variable-rate products, the interest rate on your credit card debt is likely to rise if the Federal Reserve continues to raise interest rates.

The what-comes-first question also tends to arise with the debt conversation: Should I pay down debt or invest? Here’s a simple guideline to help in your prioritization. Hint: The rule of 6%.

  1. Comparison shop on goods, services and subscriptions.

Scrub bank accounts, looking for subscription services that overlap or that you don’t use anymore. Cancel them. Do you really need five streaming TV services? (C’mon, be honest.) Comparison shop on gas and grocery runs too. Other ways to save at the pump: skip the premium option and fill up on Mondays or Fridays.

  1. Keep up with your emergency fund.

Three to six months of emergency savings is the tried-and-true amount for an emergency fund. These funds typically are put into a savings account, which provides quick access to the money but at a lower interest rate or return on investment. That’s OK, because that’s the job of this account to be easy to get to and a no-hassle investment.

Regarding the size of your emergency fund, consider building a larger one than the standard three to six months in reserve*:

  • during a recession. (Forecasters now expect a recession to begin later in 2023 than they had thought.)
  • If you’re in a high-risk industry where layoffs are common.
  • If your income isn’t steady.
  • If you’re retired (and most of your money is in more-volatile stock and bond investments).


Because economies change, life priorities change and financial situations change. It’s all ever evolving, and being financially literate enables you to better manage your money through external stressors with less stress and more confidence.

We want to be your most financially literate partner through all of it. Let’s connect today.