GOLDEN RULES:

Rapidly rising prices force households to spend more on just getting by.

That leaves less to save and for households already only just making ends meet, it can mean spending their savings just to stay afloat.

When inflation is well in excess of the interest paid on savings accounts – as the 7.3% inflation rate currently is – it gets less and less attractive to save.

In fact, if prices are going up, some people reason that it is better to buy something now, rather than hold off and end up paying more for it later.

I have had friends justify spending to me with that rationale.

The Reserve Bank Te Pūtea Matua calls inflation ‘‘the thief in your pocket’’. Some people prefer to spend now and give the thief less time to work.

This dual disincentive to save is visible in statistics put out by the Bankers’ Association, covering the first six months of the year.

They show the amount of money households had in savings accounts decreased 7.6% to

■ Pay attention and watch the pennies

■ Have a budget and a plan

■ Don’t be one of life’s passive actors

$113 billion, with an average balance of $16,800.

Where has that money gone? Multiple places, some of them more cheerful than others.

Some people will have put money to work elsewhere in a bid to beat inflation or to prepare for markets to rise once inflation and war misery begin to pass, investing it in shares, for example, or term deposits.

The Bankers’ Association said money in term deposits rose 3.3% to $134b.

Some, less fortunate, will have spent savings just to make ends meet, put food on the table, pay rent or manage mortgage repayments.

Perhaps the single most common reaction to inflation is, however, to carry on as normal.

When researchers studied New Zealanders’ knowledge of inflation, they found 40% of people telling them the rate of inflation did not influence their decisions to spend or save. People do not always have the best insights into their own behaviour.

I do think people react but sometimes it takes time.

It is like the frog in the saucepan analogy. The water is getting hotter but the frog does not jump out until it starts getting really uncomfortable.

It seems people react to last year’s inflation rate, rather than actually anticipating future expectations of inflation.

Some people react more strongly than others.

Researchers found that reactions were stronger to inflation in higher-cost areas – North Islanders in general find it harder to cope with rising prices.

They also found that reactions were stronger among workers