Enough Already

Why The F*ck Is Everything So Expensive Right Now?

When is this going to end, and how can you explain it all to your kids? A financial expert breaks it all down.

Originally Published: 
Budgeting right now can feel exasperating due to rising costs associated with inflation.
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You don’t need me to tell you everything feels more expensive these days. From gas prices to groceries, diapers to drugstore essentials, it’s impossible not to feel the pinch every time you pull out your wallet for something.

It feels like hit after hit, especially when so many families were already struggling financially during the pandemic. So, how did we get here, and when will it end? And what does that look like? Will the price of goods actually go down, or will things just remain steady for a while? Scary Mommy spoke with a financial pro, who explained why everything is still so expensive and what the foreseeable future might look like.

What even is inflation?

First, it’s worth mentioning that it’s totally OK if your baseline knowledge of the economy is limited. It’s confusing and ever-changing, and frankly, low-key exhausting trying to make sense of it all.

Thankfully, Jennifer Seitz, CFEI and Director of Education at Greenlight, is here to help. “Put simply, inflation is the rate at which prices are increasing,” she says. “The higher the inflation rate, the more expensive goods or services become over time. Many factors in the economy can cause price increases on individual items or in certain areas — but when prices rise on average across all consumer goods and services over longer periods, it’s called inflation.”

And if the current cost of living feels untenable, that’s because inflation broke a 40-year record last year, impacting everything from housing costs to medical care. And economic experts anticipate a recession in a matter of months — more on this in a minute.

Curious about how inflation is calculated? “Inflation is measured using price indexes, such as the Consumer Price Index (CPI),” says Seitz. “The CPI tracks the average change in prices of a basket of goods and services over time. The percentage change between two periods is then used to calculate the inflation rate using weighted averages. The CPI includes a majority of all goods and services in various categories of consumer spending.”

Why is this happening now?

Seitz explains that it’s not just the aftermath of the COVID-19 pandemic causing costs to rise. “Rising costs can be attributed to a combination of factors,” she shares. “While the pandemic has contributed to supply chain disruptions and increased demand for certain goods, other factors such as government policies, global economic conditions, and consumer expectations play a role in driving up costs and inflation.”

All these factors are what’s contributing to a worldwide cost of living crisis. However, it goes without saying that the ripple effects are felt the most among lower-income families, who faced economic hardship before prices began rising to the record-high levels we’re seeing these days.

Another major factor, per Seitz: wages remaining stagnant. Most consumers aren’t going to spend money they don’t have in the first place, creating a cyclical effect on the economy.

So, why can’t employers just pay better wages? “Several factors can contribute to wages not keeping up with the rising cost of living,” says Seitz. “Slow economic growth limits what companies pay employees. Technological advancements, global competition, and changes in the job market can impact wage levels. When wages do not keep up with inflation, purchasing power decreases, which means our money can buy less.”

Wages for the average American worker have been far too low for far too long. Every worker in every industry or role deserves to make not just a minimum wage but a living wage, and this is without the impact of the current state of inflation.

So, what does the future hold?

Unfortunately, it’s tough for even the pros to map out, says Seitz. “Economists predict that inflation will eventually slow down to the target of the Federal Reserve, which is 2% annually — but the timing isn’t certain.” That uncertainty means a solid chance for a recession, which is defined as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real gross domestic product (GDP), real income, employment, industrial production, and wholesale-retail sales,” according to the National Bureau of Economic Research (NBER).

It’s understandable if this is all making your head spin, but Forbes notes that recessions are actually relatively common and short-lived — it’s what separates them from a depression, which is worse and longer overall.

How do you explain all this to your kids?

As you’re cutting back on spending, you might wonder how to answer questions from your kids, who could feel overwhelmed by seeing parents and caregivers stressed. “We’re in a period of economic uncertainty, and the younger generations may not fully understand what terms like inflation really mean,” says Seitz. “Parents are on the frontlines of educating their kids about the world around them, and personal finance is at the forefront of everyone’s mind. A recent Greenlight survey found that 55% of all parents and teens said inflation was their biggest financial stressor.”

“Our suggestion is to openly talk to your kids about what’s happening in the economy,” she adds. “Take inflation, for example. Does your teen know how the average cost of items has increased year over year? From May 2021 to May 2022, that number increased 8.6%! Last June, the stock market officially turned to a bear market — but what does this mean? A bear market is a period of stock price declines and low investor confidence. It’s commonly described as a fall of 20% or more from recent market highs on major indexes, such as the S&P 500 Index or Dow Jones Industrial Average.”

She recommends keeping explanations age-appropriate “while keeping in mind that the economy goes through cycles over time.” Encouraging your little one to invest a small amount of money is a great idea. “Despite its normal ups and downs, the stock market has gone up historically over time,” says Seitz. “When the rate of return is higher than the rate of inflation over the long term, your money can have more purchasing power.”

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