How Inflation and Fraud Affect Older Adults

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  • 0:01 Older Adults as Consumers
  • 0:42 The Impact of Inflation
  • 1:51 Potential for Fraud
  • 4:50 Lesson Summary
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Lesson Transcript
Instructor: Christine Serva

Christine is an instructional designer, educator, and writer with a particular interest in the social sciences and American studies.

What if the money you have in savings suddenly had less buying power than it did before? Or worse yet, what if it disappeared? This lesson explores the impact of inflation and fraud on older consumers.

Older Adults as Consumers

As consumers of products and services, we all spend money out in the world. We spend it on food, electronics, rent or mortgage payments, utilities, transportation, and on many other needs and wants. Older adults face a challenge to their financial freedom when others aim to prey on the resources they bring to the table as consumers. They also may be affected by shifts in the economy, as the power of their spending fluctuates. This lesson looks at two areas that affect older adults as consumers: inflation and fraud.

The Impact of Inflation

Inflation is the rate of increase in the average prices of goods and services. For instance, in 1950, a person could buy a new car for $1,500. For an average new car in 2014, a person would have to spend over $30,000. Then again, in 1950, minimum wage was only $0.75, compared with $7.25 in 2014.

During our younger years, as we work at a job, our wages often increase with inflation. As your career progresses, your income may also increase due to promotions and raises. For those in retirement, living on a fixed income and therefore unlikely to increase their income through career progression, inflation can create a challenge. If your income stays the same, but prices increase, you will be less well-off as a result. If the rate of inflation is particularly high, such as during a period of strong economic growth, this challenge may be even greater.

Potential for Fraud

Another area of risk for an older consumer is the potential for fraud. Fraud is deceptive or criminal activity for personal gain. The type of fraudulent acts committed against older adults can range in their structure. A common form of fraud involves promises of high rates of return on investments which never materialize. Home repair schemes are also common, in which an older adult is charged unreasonably high prices for low-quality work or work that never occurs. Another variation on this fraud is when work has been completed and a high cost is demanded of the consumer, who has never agreed to the extent of the work but is bullied into paying.

Identity theft can also be used against a person who may have given their personal information to an untrustworthy requester. Imagine a grandmother named Trudy receives a call from someone who says, 'Grandma, it's your favorite grandchild!' Trudy says, 'Beth, is that you?' The caller says, 'Yes, it's Beth. I'm in trouble and need you to wire me money to help me out.' As you can imagine, the caller is not Beth and if Trudy wires funds to help out the person claiming to be her granddaughter, she will likely never see that money again.

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