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Why Instant Pay is becoming more popular during inflation

8 min read

Dan Bucherer
#Instant pay#payroll#payday#earned wage access#paycheque#inflation
Why Instant Pay is becoming more popular during inflation

Rounding it up

  • Inflation is the reduction in the value of money; it occurs because there is more currency in the economy but fewer goods available for purchase.

  • Instant Pay is popular during inflation because it provides quick access to your money so you can pay bills, avoid fees, and take care of emergency expenses.

  • Unlike traditional paydays, Instant Pay doesn’t make you wait weeks or months to get access to your funds. That makes it a powerful tool during inflation when prices rise quickly.

  • Instant Pay is also great for employers because it increases employee retention and productivity, making it easier to meet business goals in a competitive labour market.

Inflation makes everything more difficult. It makes products more expensive, makes the money you have worth less, and is, frankly, just a scary-sounding word. Inflation can be helpful to some, but for most of us it ends up making our financial situations more complex.

To make matters worse, there are very few things you can do to shield yourself from the trouble that inflation brings—except Instant Pay. With Instant Pay, you can access up to 50% of your earned wages at the end of every workday so you no longer have to wait until payday to get your hard-earned money.

Let’s take a look at some of the ways Instant Pay can help you deal with inflation and why it’s becoming so popular during this time in our economic history.

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What is inflation?

Before we go too far, we need a good understanding of what inflation actually is and how it affects regular Canadians.

Put simply, inflation is the devaluation of currency.

With inflation, the purchasing power of the money in your pocket is reduced. A small, standard rate of inflation is often the goal of governments worldwide. For example, the Bank of Canada’s target inflation rate is 2%. This level of inflation is a sign that an economy is chugging along at a normal rate and is growing.

But when inflation starts to increase above that target rate, it can be a sign that an economy—and more importantly, the people living in it—are struggling.

This is because, when inflation rises, it costs more money to buy the same products. The Bank of Canada and other central banking authorities measure the inflation rate by tabulating the average cost of a fixed set of goods. When these goods increase in price, the inflation rate increases as well.

So what causes inflation?

One of the biggest causes is more actual currency floating around in the economy. When there are more pieces of currency in circulation, each piece is worth slightly less.

For example, during the COVID-19 pandemic, many governments, including Canada’s, pumped a lot of money into the economy in the form of pandemic aid like the Canada Emergency Response Benefit (CERB). These funds were very helpful in keeping hard-working Canadians financially afloat, but they likely also contributed to inflation.

Another cause of inflation is the increasing scarcity of goods and services. We also saw this during the COVID-19 pandemic as many supply chains were seriously disrupted. This contributed to widespread shortages of goods and services around the world.

When you combine an influx of money and a decrease in the availability of goods and services, we have a spike in inflation. That’s exactly what happened in Canada in February 2022 when inflation hit 5.7%.

What Is Instant Pay?

Instant Pay by KOHO is a payroll benefit that allows you to cash out up to 50% of your paycheque before payday.

It’s important to note that, with this program, you’re not taking out a loan of any kind—with Instant Pay you’re simply taking money out from your paycheque for work you’ve already done. That means when payday comes, your cheque will be slightly smaller to reflect that withdrawal; but you’ll already have the cash!

Your employer has to work with KOHO to set up Instant Pay, but some of the largest employers out there, including Aseego and Walmart, already offer these sorts of earned wage access (EWA) programs.

KOHO Signup Link

Why is Instant Pay so popular during inflationary periods?

Inflation makes everything more difficult. Getting your hands on the money you’ve rightfully earned before payday may make your life just a little bit easier.

There are a few key reasons behind Instant Pay’s popularity, especially during times of inflation. Here’s what you need to know.

Instant Pay Makes it Easier to Align Payday With Your Bills

Inflation exacerbates problems that you might already have. For example, if your paycheque arrives a week after your bills are due, you’re going to have a hard time making ends meet.

With Instant Pay, paying bills is easier than ever before. That’s because you can use Instant Pay to withdraw the amount you need to cover the cost of your bills. As a result, you can stay on top of your payments and avoid having to take out a cash advance or payday loan.

With Instant Pay, You Can Cover Emergency Expenses

Emergencies can happen without notice, but when they sprout up during a time of inflation, your ability to react to and fix an emergency is severely hampered. Instant Pay makes this easier by allowing you to take out cash you’ve already earned so you can spend it on emergency expenses.

For example, if you have to pay for a large and unexpected car repair but your paycheque doesn’t arrive for a few more days, you can use Instant Pay to cover your costs.

All you have to do is withdraw up to 50% of your earned wages, deposit the funds into your KOHO account, and use your KOHO card to pay for your expenses. Doing so even lets you earn cashback in the process. What could be better?

Instant Pay is Free to Use

The best things in life are free -- like Instant Pay!

If you have a KOHO account, you can use Instant Pay to withdraw up to 50% of your paycheque for no cost at all. There is a small fee to send money to a different bank, but if you’re a KOHO user (and really, why wouldn’t you be?), then you’re all set.

These sorts of fee-free programs are invaluable during inflation when the cost of everything seems to rise uncontrollably. When you can get something like Instant Pay for free, life during inflation is that much easier.

You Can Use Instant Pay to Save on Fees

A recent report based in the United States found that employees saved more than $1,000 a year by using earned wage access programs like Instant Pay.

Many of these employees who saved money using Instant Pay did so because the program helps them avoid late fees, overdraft fees, and the high interest rates that come from predatory payday loans. With all that extra money you save, you can have more income at your disposal to combat the rising costs of inflation.

I’m an Employer. Instant Pay Sounds Cool. What’s the Catch?

There is none!

Instant Pay is available at no cost to employers and it integrates seamlessly with your existing payroll systems. Plus, Instant Pay can even increase employee loyalty to your company and it can help them be more productive at work.

During periods of inflation, it can be difficult to manage and retain employees, so anything a company can do to provide additional value to their team members is a great tool. When you realize that Instant Pay is also completely free to use, then you’ve got yourself a free and easy way to increase employee retainment and productivity at your company.

Instant Pay Is Awesome. But Are There Other Things I Can Do to Manage Inflation?

Periods of inflation can be scary and challenging, even when you have something as awesome as Instant Pay to help you out. With that in mind, here are some other things you can do to stay financially confident during times of inflation:

Make a Budget

Making a budget is always important, but it’s even more vital during periods of high inflation. Creating a budget that lists all of your income sources and expenses can help you see where you might have some wiggle room financially and where you may need to cut back.

Once you have a budget, put it into action!

Do your best to stick to your budget by holding yourself accountable for meeting your goals. If you’re a KOHO Premium account holder and you’re struggling to stay on target, consider reaching out to one of our free financial coaches who can help you create a personalized budgeting plan.

Avoid Variable Loans

Loans like those that you might take out for your home, your car or for education come in two main types: fixed and variable.

Fixed interest loans are those where the Annual Percentage Rate—or APR—is fixed at the point when you sign the loan. So a fixed interest rate of 2% on a home will be 2% for the life of the loan or until your time to refinance with the company.

Variable rate loans, on the other hand, fluctuate with the market. So when the interest rates start to tick up, your loan suddenly becomes more expensive. This can be a big problem during periods of high inflation as many central banks, such as the Bank of Canada, raise interest rates to combat out-of-control prices.

Thankfully, there’s a solution to this issue, namely, moving from a variable to a fixed rate loan. You can sometimes get rid of your variable rate agreement by refinancing your mortgage or car loan and opting for a fixed rate moving forward. This tactic isn’t right for everyone, though, so check with a financial advisor if you have specific questions about your unique situation.

Adapt to Your Surroundings

During periods of inflation, goods and services will get more expensive. One of the easiest things you can do to combat this is to be mindful of the cost of the products you buy and to opt for cheaper alternatives when necessary.

For example, in the grocery store, consider store brand items as opposed to name brand items. When you want to buy a big-ticket item, consider waiting for it to go on sale or look for coupons and discount codes that can help lower your costs.

Reducing your spending, even just a little bit, can make living through periods of inflation that much easier.

Don’t Alter Long Term Plans

When big events like inflation hit, our first instinct is often to run to safety as quickly as possible. You might consider selling certain investments to ensure your portfolio maintains its value.

But it’s important to think long-term.

The period of inflation we’re currently in simply will not last forever. Eventually, prices will stabilize and your investments will continue to grow in value. Those who are able to think long-term and avoid emotionally-charged investment choices will be better positioned as the economy straightens out over time.

Instant Pay: A Great Tool for Inflation and Anytime!

Instant Pay helps bridge the gap between paycheques and bills so that you can have your earned wages when you need them most. During periods of inflation where costs rise quickly, Instant Pay can help you manage your financial situation so you can stay one step ahead of the world around you.

Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our Subscription Plans page for our most up to date account information!

Dan Bucherer

Dan is a runner and writer living in the Washington, D.C. area, where he currently works for a financial services trade association as the Communications Director.

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