Budgeting Remittances Amid Inflation: Helping Families Cope

High inflation is squeezing household budgets in many countries, making it harder for families to afford food, fuel, and other essentials. For millions of households around the world, remittances, the money sent home by relatives working abroad, have become a vital lifeline during these inflationary times. This blog offers a global perspective on how rising prices impact family finances and shares tips on how to send money home efficiently to help loved ones fight the cost-of-living surge.

What Is Inflation and Why Are Prices Rising?

Inflation is the general increase in prices of goods and services over time, which in turn reduces the purchasing power of money. In practical terms, when inflation is high, the same amount of money buys less than it used to. Over the past few years, the world has experienced a sharp uptick in inflation. Global inflation soared to its highest level since the mid-1990s in July 2022. This surge was fueled by a combination of factors: economies rebounding from the pandemic, supply chain disruptions, and spikes in food and energy costs amid events like the war in Ukraine and the ongoing conflict in Palestine. These crises have disrupted trade flows, increased uncertainty, and driven up the prices of essential goods in many regions. The result has been rising prices virtually everywhere, from grocery stores to gas pumps, straining households’ ability to make ends meet.

To put the recent spike in perspective, the average global cost of living rose more in the 18 months after early 2021 than it did in the previous five years combined. Essential commodities have been driving this trend. Food and fuel are among the biggest contributors to the inflation surge, meaning families now pay much more for basic staples and transportation than they did a short time ago. In many countries, food price inflation alone in 2021–2022 was as high as the total inflation rate in the years before the pandemic. Such rising prices erode real incomes: if your wages or earnings don’t increase at the same pace as prices, you effectively have less money to cover your needs. For families already living on tight budgets, high inflation forces painful trade-offs, for example, cutting down on nutritious foods, delaying healthcare, or forgoing school expenses, just to afford the cost of living each month.

The Squeeze on Household Budgets

When prices shoot up rapidly, household budgets get squeezed from all sides. Families must spend a larger share of their income on necessities, leaving little room for savings or discretionary expenses. Imagine a family that used to comfortably buy a month’s groceries with a certain amount of money; suddenly, that amount might only stretch for two weeks of food due to inflation. This scenario has been playing out globally. In both wealthy and developing nations, people are feeling the pinch of higher costs for things like cooking oil, rice, bread, electricity, rent, and gasoline. Many have watched their cost-of-living climb to levels they haven’t seen in decades. For instance, in the United States and Europe, inflation reached multi-decade highs in 2022, and consumers faced steep increases in grocery and utility bills. In developing countries, the impact can be even more severe, as a larger portion of household income goes toward food and fuel items that have seen some of the highest price jumps.

Crucially, wages often don’t keep up with these rising prices, especially in the short run. That means a real pay cut for workers in terms of what their salaries can buy. Households are forced to adjust their spending habits: prioritizing essential items and cutting out non-essentials. Families might switch to cheaper brands, buy in bulk to save, or use less of things like electricity or gas to lower their bills. Those with some savings may dip into them to cover daily expenses, while others might resort to borrowing to get through the month. In countries where social safety nets are thin, the burden of inflation falls largely on individual families to cope as best as they can.

For the poorest households, the situation is especially worrying. They typically spend a large share of their income on food. When food prices go up by 10% or 20%, there’s often no choice but to consume less or cheaper (and sometimes less nutritious) food. We have seen reports of families reducing meal portions or skipping meals altogether during high-inflation periods. Similarly, spikes in fuel prices make transportation and cooking more expensive, which can ripple through all other goods due to higher supply costs. In short, high inflation acts like a pay cut or an extra tax on households, one that hits low-income families hardest because they have the least flexibility in their budgets.

Remittances: A Lifeline During Inflationary Times

Remittances have emerged as a critical support system for families facing economic hardships. Remittances are often described as a lifeline for millions of households in low- and middle-income countries. During inflationary times, this lifeline becomes even more crucial. As local prices climb and domestic incomes struggle to keep up, the funds sent by relatives abroad help bridge the gap, allowing families to afford essential goods and services that would otherwise be out of reach.

Global remittance flows have been remarkably resilient despite recent economic challenges. In 2022, money sent home by migrant workers worldwide reached a record high, roughly $794 billion in total, marking about a 5% increase from the previous year. Of that, an estimated $626 billion went specifically to low- and middle-income countries in 2022. These figures climbed even as the world was grappling with the COVID-19 aftermath and surging prices. By 2023, remittances to developing countries grew further (around 3.8% growth to $669 billion), albeit at a slower pace. The sustained growth underscores how migrants continue to support their loved ones back home, even when times get tough globally. A World Bank report notes that during crises, migrants show resilience and sacrifice to keep helping their families, though high inflation and slower economic growth in host countries are beginning to affect how much they can send.

Why are remittances so important during inflationary periods? One reason is that they directly boost the incomes of recipient families, allowing them to better cope with rising prices. Studies have found that a large portion of remittances is used for immediate consumption needs: food, housing, healthcare, education, and other day-to-day expenses. For example, in Mexico (one of the top remittance-receiving countries), remittances are “used mainly for necessities, food, clothing, and health care” and form an important part of household expenditures on essentials. This means that when a family’s earnings fall short of covering inflated grocery bills or school fees, money from abroad can fill the void and prevent severe hardship. In many cases, remittances are putting food on the table for families who would otherwise struggle to afford it.

Moreover, remittances have a stabilizing effect on households and communities. Unlike some forms of aid that might be delayed or miss the neediest, remittances flow directly and usually quickly to households, without intermediaries. The family receiving the money can decide how best to spend it under the circumstances, whether that’s buying enough staples to get through the month, paying the electricity bill, or covering a medical emergency. This flexibility is crucial during high inflation when needs can be urgent and varied.

It’s not just individual families that benefit; at a macro level, remittances have become a pillar of many economies. They have even surpassed foreign direct investment and foreign aid in recent years as a source of external finance for developing nations. For instance, countries like Tajikistan, Tonga, Lebanon, and others see remittances making up a huge share of their GDP (often over 25-30%). In such places, remittance inflows help stabilize the national economy by improving the balance of payments and supporting consumer spending even when domestic economic conditions are weak. Migrant workers abroad are helping to shoulder the burden of economic crises at home by sending money back. The World Economic Forum noted that the growth in remittances in 2022 was evidence of migrants “helping their families back home in troubled financial times,” even as their costs rose.

Challenges for Migrant Workers Sending Money Home

While remittances are a godsend for recipients, it’s important to acknowledge that migrants themselves are feeling the effects of inflation, both in their host countries and in the needs of those back home. The act of sending money abroad doesn’t happen in a vacuum; the senders have to manage their budgets under the same inflationary pressures. Recent surveys and reports reveal that migrant workers around the world are facing a dual challenge: higher living costs where they live, and higher expectations or needs from their families back home due to rising prices locally.

Both sides of the remittance corridor are getting more expensive; it costs more to live in the country where the migrant works, and it costs more to afford basics in the country where their family resides. This puts migrants in a tough spot: they might have less disposable income to send, yet their families may be asking for more help to cope with rising prices of food, rent, and other necessities.

How are migrants responding? The word often used is “resilience.” Migrant workers are finding ways to tighten their belts so that they can continue to support their families. Nonetheless, migrants have limits. With paychecks stretched by inflation, some have had to make difficult choices about remittances. For example, to send money to fewer people or only to immediate family, focusing their support where it’s most urgently needed. Someone who used to send small amounts to extended relatives might refocus on just their parents or children during this period of high inflation. This prioritization is a practical response to financial strain: they want to ensure that at least their closest family’s essential needs are covered first.

In many cases, migrants are also digging deeper or working harder to meet their families’ needs. Some reports describe migrants taking on extra work shifts or side jobs to earn additional income, as the usual remittance amount suddenly covers less than it used to, due to price hikes. This scenario is common: if a family’s grocery bill back home doubles, the relative abroad might try to send more money, if they can, to ensure the family can purchase the same items they did before. For instance, many migrants in the U.S. and Australia reported upping their contributions for loved ones’ medical bills or school costs to keep pace with rising expenses.

All these adjustments underscore a key point: sending money home during inflationary times requires careful budgeting and planning on the part of migrants. They must juggle their own higher expenses while striving to help relatives whose purchasing power is shrinking back home. It’s a delicate balance of generosity and self-discipline. Thankfully, some strategies and tools can help make each dollar, euro, or pound sent go further, benefiting both the sender and the receiver. In the next section, we’ll explore tips for how to send money home efficiently and maximize the support you provide your family amid high inflation.

Tips on How to Send Money Home Efficiently During High Inflation

When every penny counts, being strategic about your remittances can ensure that more of your hard-earned money reaches your family and covers what they need. Here are some practical tips for sending money home efficiently in inflationary times:

Compare Money Transfer Services to Save on Fees and Rates

Not all remittance methods are equal. Banks, for example, often charge hefty fees and poor exchange rates, meaning a noticeable chunk of your money never reaches your family. Sending a $200 remittance through a traditional bank can cost over 12% in fees on average while using a digital money transfer operator might cost around 5% or less. Do some homework and compare providers, look at transfer fees, exchange rate markups, and any hidden charges. Even a difference of a few percentage points can be significant. Remember, globally, the average fee for sending money was about 6.3% as of 2023, which translates into migrants paying $51 billion in transfer costs in that year alone. The lower you can get that fee, the better. Using online services or fintech apps (like sendvalu, to name one) that specialize in remittances can often be cheaper and faster than traditional banks. Many such services offer low-cost transfers and competitive exchange rates, so a greater portion of your money converts into local currency for your family. Shop around for promotions or referral deals as well; some platforms waive fees for first transfers or have loyalty programs that reduce costs over time. Choosing lower-cost transfer options can help more money reach your family instead of being lost in fees.

Time Your Transfers and Watch Exchange Rates

Inflation often comes with currency fluctuations. If the currency of your home country is weakening (losing value) against the currency you earn in, your remittance might go further for your family, but the opposite can also be true. Keep an eye on exchange rate trends. While it’s hard to predict exchange markets, being mindful of rates can help you choose an optimal time to send money. For example, if you see that your home currency has dropped significantly, sending a bit extra or timing a transfer when the rate is favorable means your family gets more local currency for the same amount sent. On the other hand, if your home currency suddenly strengthens, you might wait (if it’s not urgent) for rates to improve. Many money transfer apps and services have rate alerts you can set up. However, avoid excessive delay for minor differences; your family’s immediate needs come first. The key is simply to be aware of the exchange rate impact on your remittance’s purchasing power. A savvy sender can take advantage of even slight upticks in forex rates to counter some effects of inflation.

Send a Bit More If Possible (Account for Inflation)

High inflation means that your usual remittance amount probably doesn’t cover as much as it did before. If you have the ability, consider increasing your support modestly to help your family keep up with essential expenses. Even an extra 5-10% can make a difference in covering rising prices of food or utilities. We saw that many migrants are indeed doing this. For instance, a majority of those sending money for things like healthcare or rent have maintained or increased the amounts as inflation surged. Of course, only do what your budget allows (we will cover that next), but recognize that your loved ones back home might be paying 20%, 30%, or more for the same groceries or electricity than a year ago. Adjusting your remittance amount to account for inflation will help them maintain their standard of living. It can also be helpful to communicate with your family about how far the money is going. They can give you feedback like, “Last year $100 covered the weekly market shopping, now it’s barely enough for 3 days.” Such insights can guide you in deciding how much to send.

Revisit Your Budget and Cut Unnecessary Costs

To sustain (or increase) your remittances during inflationary times, you might need to trim your expenses. Think of it as budgeting for two households, yours and your family’s. Review your monthly spending and identify areas where you can save. Maybe it’s those streaming subscriptions you hardly use, the takeout dinner you could cook at home, or the gym membership you could replace with outdoor exercise. Many migrants have already adopted these tactics: reports show they are eating out less, using public transportation more, and generally prioritizing needs over wants so they can free up money for remittances. Small sacrifices in your daily life can add up to substantial savings. Create a specific remittance budget: decide on a set amount or percentage of your income that you aim to send home regularly, and then plan your remaining spending around that. It may help to treat the remittance like a “must-pay” bill. By being disciplined and perhaps embracing a more frugal lifestyle while prices are high, you can continue supporting your loved ones without compromising your financial stability.

Prioritize Essential Uses for Remittances (Coordinate with Family)

During inflation spikes, it’s wise to have frank discussions with your family about budgeting the remittance money you send. Make sure the funds are directed to the most critical needs first. Most families naturally do this, using remittances for food, housing, healthcare, and schooling before anything else. Still, communication can ensure everyone is on the same page. Encourage your family to budget on their end as well, perhaps writing down a list of monthly necessities (and their now-higher costs) so you both understand how far the money goes. If you used to send money that covered some extras or luxuries, it might be time to mutually agree to pause those until inflation eases. For example, if a portion of remittances was going towards big family celebrations or non-essential purchases, consider prioritizing savings and emergency funds instead. Inflationary times call for focusing on the basics. Some families even set aside a small emergency fund out of remittances, if possible, to handle sudden spikes in expenses (like a sudden jump in medicine prices or an unexpected bill). By working together on a spending plan, you and your loved ones can make the remittance stretch further and avoid shortfalls.

Use Secure, Efficient Channels (Go Digital)

The days of sending cash through risky channels or paying exorbitant fees for traditional wire transfers are fading, and that’s a good thing for your wallet. Embrace digital remittance platforms and mobile money solutions that often have lower fees and faster delivery. Not only can this save money, but it also ensures your family gets the funds quickly when they need them. During high inflation, delays can be costly (prices might go up even in a week or two!). Online transfer companies typically offer fast transfers with transparent fees, so you know exactly how much will arrive on the other side. They also tend to have better exchange rates than high-street banks. Additionally, using secure digital channels provides peace of mind; you can track the transfer, and your family can often receive the money directly into a bank account or mobile wallet, reducing the hassle and cost of travel to collection agents. When choosing a service, ensure it’s licensed and has good customer reviews, and pay attention to any special features: for example, some might allow you to lock in an exchange rate or schedule recurring transfers (useful for budgeting). Ultimately, the goal is to maximize the value of each remittance and minimize any fees or losses in transit.

Stay Informed and Plan Ahead

Economic conditions can change, so staying informed about inflation trends both in your country of residence and back home can help you plan. If experts predict continued inflation, you might prepare to send a little extra or increase the frequency of smaller transfers instead of one large sum, so that the money can immediately be used for expenses before prices rise further. Conversely, if inflation is starting to cool down (perhaps due to policy measures or falling commodity prices), you might catch a bit of a break. Keep an eye on news from reliable sources like the World Bank or International Monetary Fund on inflation forecasts, and on any government policy changes (like subsidies or price controls in your home country) that might affect your family’s cost of living. Financial planning is key: if you anticipate tougher times ahead, try to set aside a bit more savings now, so you have a cushion to continue supporting your family even if your expenses rise or if you face a temporary setback. It could be as simple as building an emergency fund equivalent to 2-3 months of remittance amounts. That way, if you lose overtime hours at work or encounter an unexpected bill, you won’t have to cut off support to your loved ones.

By following these tips, you can send money home more efficiently and effectively, ensuring that maximum value reaches your family. Every dollar (or peso, euro, naira, etc.) saved on fees or sent smartly is a dollar that can help put food on the table or lights in the house for your loved ones. In challenging times, being proactive and informed in your remittance strategy can significantly ease the pressure on both you and your family.

How sendvalu Supports Your Remittances in Challenging Times

High inflation poses a serious challenge, but with thoughtful budgeting and smart money transfer strategies, migrant families can weather the storm. Remittances remain a powerful tool for fighting rising prices, keeping children fed, homes warm, and dreams alive when local economies are under pressure. Both senders and receivers are adapting with remarkable resilience: migrants are managing their rising costs while continuing to send support, and families back home are carefully stretching each transfer to cover essentials.

At the heart of this support system is the choice of a reliable, affordable, and flexible remittance service, and that’s where sendvalu plays an important role. Designed for the needs of migrants and their families, sendvalu offers a fast and secure way to send money across borders, with a wide range of payment options that make the process as convenient as possible. You can fund your transfers using a credit or debit card, initiate a direct bank payment, or pay through Apple Pay or Google Pay. For those using digital assets, sendvalu also accepts cryptocurrency, allowing users to send money home using modern, borderless payment methods.

Just as important as how you pay is how your loved ones receive the money. sendvalu adapts to the local realities of each country, offering multiple delivery methods to suit different needs. Depending on the destination, families may receive money directly into a bank account, through a mobile wallet for immediate access, or, in some countries, via home delivery for added ease and comfort. This flexibility ensures that remittances arrive quickly and securely, giving families the support they need when they need it most.

To make things even easier, the sendvalu mobile app puts all these features at your fingertips, allowing you to send money anytime, anywhere, right from your phone. The app is designed to be intuitive and user-friendly, helping you track your transactions, review exchange rates, and repeat transfers with just a few taps. It also keeps you updated with notifications so you’re always in control. Whether you're on the go or planning your next transfer, the app gives you a smooth and secure experience that saves time and simplifies the process.

Even as prices continue to rise, the love and solidarity expressed through remittances remain constant. With careful planning, open communication, and the efficient tools provided by sendvalu, you can continue to be a steady source of support for your family. Inflation is temporary, but the difference you make through each transfer is lasting. Together, through smart decisions and unwavering care, families can stay strong and even thrive in inflationary times.

Ready to support your loved ones more efficiently? Learn how easy it is to send money with sendvalu. Explore our Remittance Services.

Sources:

World Bank – Migration and Development Brief 40 (2023)

World Economic Forum – Migrant Remittances Hit Record High Despite Inflation

Our World in Data – Inflation Around the World

IMF – Inflation: Prices on the Rise

Dallas Federal Reserve – How Remittances Help Mexican Households Fight Inflation

UNDP – Inflation Surge Increases Risks of Hunger and Poverty Worldwide

OECD – Rising Prices and the Cost-of-Living Crisis