Inflation is at a 3-year high, and it’s killing your cash — where you should put your money now

As inflation creeps upward, many American households are losing their purchasing power — meaning their dollars don't stretch as far as they used to.

In May, inflation rose to 4.2% over the previous year, up from 3.8% in April, according to the latest Bureau of Labor Statistics. That's the highest rate (1) in three years. The Fed's goal is to keep inflation around 2% annually (2).

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That jump is due, in large part, to higher energy prices driven by the Iran war. Compared to 12 months ago, the cost of energy has risen by 23.5%, with gasoline surging 40.5% (3). The initial oil shock of March is also trickling through the economy, impacting other areas that rely on oil and gas, such as airline fares.

And the financial pain points are spreading for Americans. As wage growth stagnates (4), household budgets are feeling the squeeze, especially with essentials like groceries and gas.

Consumer sentiment reflects this, with household expectations around their own finances and future credit access deteriorating, according to the Federal Reserve Bank of New York's May 2026 Survey of Consumer Expectations (5).