Month: May 2026

We’ve all seen the headlines about inflation retreating from its highs during the COVID pandemic, and lately the current annual inflation rate is near 3%, yet many consumers wonder: “If that’s the official inflation rate, why do my bills and other costs seem so much higher than last year?”

Many of us ask ourselves that question. The problem is that when the government reports inflation, it does so for a basket of goods, and some elements of that basket, like transportation, may be much higher than the average rate reported. That can explain why your home heating bill is 15% higher than last year, while average inflation is hovering between 2% and 3%.

But besides affecting the price of goods and services you pay for regularly, inflation can also affect your investments.

What is inflation?

Inflation is defined as an upward movement in the average level of prices. Each month, the Bureau of Labor Statistics releases a report called the Consumer Price Index (CPI) to track these fluctuations.

It was developed from detailed expenditure information provided by families and individuals on purchases made in the following categories: food and beverages, housing, apparel, transportation, medical care, recreation, education, communication and other goods and services.

The CPI is a basket of goods, and your basket may not reflect the index’s basket. While it is the most used indicator of inflation, the CPI has come under scrutiny. For example, the CPI rose 2.4% over the 12 months ending February 2026, holding steady from the 2.4% rate reported in January.

Core inflation (excluding food and energy) increased 2.5% over the same period, indicating a stabilization in overall price growth. However, a closer look at the report shows movement in prices on a more detailed level. Motor vehicle maintenance and repair services, for example, rose 5.6% during those 12 months.

The effect on your investments

As inflation rises and falls, it can have the following effects on your investments and purchasing power:

1. Inflation reduces the real rate of return on investments. For example, if an investment earned 6% during a 12-month period and inflation averaged 1.5% over that time, the investment’s real rate of return would have been 4.5%. If taxes are considered, the real rate of return may be reduced even further.

2. Inflation puts purchasing power at risk. When prices rise, if you are on a fixed income, the money you have will cover fewer goods and services.

3. Inflation can influence Federal Reserve interest rate decisions. If the Fed wants to control inflation, it has various methods for reducing the amount of money in circulation. The most common way the Fed does that is to raise interest rates. As the logic goes, if interest rates rise, people and businesses will pull back on their spending, which in turn can reduce inflation. Also, if you are planning on taking out a loan, a higher inflation rate means you’ll have higher payments than if you take it out when rates were lower.

Seek out a trusted professional

When inflation is low, it’s easy to overlook how rising prices are affecting a household budget. On the other hand, when inflation is high, it may be tempting to make more sweeping changes in response to increasing prices.
The best approach may be to reach out to your financial professional to help you develop a sound investment strategy that takes both scenarios into account.

Once their kids are teenagers and in high school, parents fret about the trouble they could get into with friends, especially at parties. Unfortunately, these gatherings may involve alcohol, posing a risk of teens harming themselves and others.

Parents of kids who throw these parties, with or without their parents’ knowledge or consent, may bear responsibility for what happens there and for injuries or damages that occur after guests leave.

While their homeowner’s liability coverage may cover financial damages, the circumstances of the accident determine which policy will respond.

Take an example of a guest who consumes several beers at the party, drives off, gets into an accident and injures himself and a passenger. The parents of both injured teens sue the parents who hosted the party, who in turn notify their homeowner’s insurance company. However, the policy’s personal liability coverage does not apply to an insured person’s legal liability for:

• The occupancy, operation or use of a motor vehicle by any person.
• The entrustment of a motor vehicle by the insured person to anyone else.
• The insured person’s failure to supervise or negligent supervision of any person using a motor vehicle.
• The actions of a minor involving a motor vehicle.

Where auto insurance kicks in

Because of this, the homeowner’s policy would not cover the parents’ liability or defense costs. However, their personal auto insurance policy may cover them. The policy’s liability insurance covers the individuals named on the policy and household residents who are their relatives for liability for bodily injury from an accident arising out of the use of any auto.

Even though the parents were not actually operating the vehicle involved in the accident, their policy will cover their liability. In addition, the auto policy that applies to the car involved in the accident (the guest’s insurance or his parents’) will also cover the hosts’ liability for the passenger’s injuries. The hosts’ policy will step in if the owners’ policy does not apply or has paid out its maximum limit.

Now, assume that the guest consumes beer, but a sober guest gives him a ride home. Rather than go straight to bed, the young man goes for a swim in his parents’ pool and drowns. His parents sue the hosts, alleging that his judgment was impaired because the hosts allowed him to drink.

In this situation, the homeowner’s policy should pay for the hosts’ liability and legal defense. Because this accident did not involve a motor vehicle and no other policy provisions that would remove coverage apply, the policy will cover the claim.

Differences in coverage

While one policy or the other may apply to a liquor liability claim, there could be significant differences between the coverage limits the two policies provide. Most homeowner’s policies provide personal liability coverage of at least $100,000 per occurrence; many provide limits of $300,000 or $500,000.

Auto policies may provide much less coverage if the homeowner has only the state-mandated minimum coverage, but those limits are relatively small. Every state has different requirements for minimum limits for injuries or deaths to third parties.

Should a young person be seriously injured or killed, the damages claimed could exceed these amounts. Parents should consider buying an umbrella policy, which pays for damages that surpass the amounts payable under homeowner’s and auto policies.

Of course, the best course of action is to properly supervise parties so that everyone has an enjoyable time and lives to have another one.