Recessions are economically challenging times with a lot of uncertainty. A recession could lead to a reduction in your income or even job loss. Strategies to build your savings during a recession may involve adjusting your savings goals and cutting expenses, while paying down loans and avoiding additional debt. Getting into the habit of saving money takes discipline and can be challenging even during non-recessionary times.
What is a recession and how does it affect your savings?
A recession is when there’s a significant decline in the economy that lasts for months or even years. This can have a dramatic impact on your savings.
You won’t lose money in a deposit account during a recession as long as it’s in a federally-insured account and within the limits of the insurance. That means either with a bank that is Federal Deposit Insurance Corporation (FDIC)-insured or a credit union backed by the National Credit Union Administration (NCUA). Your deposits must also be within the guidelines of FDIC and NCUA insurance (up to $250,000 per depositor, per ownership category, per insured institution).
However, a recession can lead to lower annual percentage yields, meaning your money won’t earn as much interest, whether that’s in a savings account, retirement account or other investments.
Also, if you lose your job, you may find it hard to get a new one during a recession. If a recession lasts for a few years, you may end up draining your savings entirely.
To help you navigate saving during a period of economic decline, we asked a number of experts for useful strategies, as well as some pitfalls you should try to avoid at all costs.
Do: Revisit (or adjust) your savings goals
While saving money may seem like an impossible task during a recession — especially if you or someone in your family is dealing with unemployment — it’s a habit that you should try to maintain, even if the amount you’re putting away each month is small.
In general, experts advise that you have enough in your emergency fund to cover three to six months of your living expenses. Even if you’re only able to set aside a small amount each month, it pays to get into the habit of saving money regularly.
“It’s a great idea to have your savings directly deposited into a separate account,” says Larry DePaulis, financial adviser and managing director of wealth management at UBS Wealth Management in Boston. “[That way] each time you get paid, the amount that hits your checking account is truly what you have available to spend. This makes it easier to know when you need to cut back on discretionary purchases.”
If you have a steady income, consider increasing your savings contributions and make it a goal to fully fund your emergency savings.
Do: Keep your savings liquid
When it comes to deciding where to store your emergency fund, it’s important to make sure the money is easily accessible in case you need it for unplanned expenses such as a costly medical bill or car repair.
A high-yield savings account gives you easy access to the funds while also earning a solid interest rate, which will help your savings grow faster. However, there are other things to consider when choosing an account for your emergency fund.
“Your primary goal should be to keep the money safe and liquid,” says Scott Schleicher, senior manager, advisory and planning at Empower, a financial services firm.
Schleicher advises that savers read the fine print when choosing an account and look for caveats like:
- Withdrawal limits
- Withdrawal restrictions
- Fees for withdrawing
The best high-yield savings accounts tend to come with none of these limits or fees and pay rates that are way higher than national average, so it pays to shop around.
In addition to having a liquid emergency fund account, keeping a separate account for other savings goals can be a smart idea.
“Keeping this money in the same place makes it too easy to dip into it for non-emergency needs.” says Annette Hammortree, CLTC, RICP, owner of Hammortree Financial based in Crystal Lake, Illinois.
Do: Try to cut or negotiate expenses where you can
Even if a recession hasn’t negatively affected your finances, it’s still a smart idea to evaluate your expenses and look for opportunities to cut back on spending or negotiate bills.
“The most direct pathway to increased savings often involves cutting back or eliminating certain expenses,” says Greg McBride, CFA, and Bankrate chief financial analyst. “Re-evaluate your needs and your lifestyle to identify opportunities to reduce expenses.”
This means taking stock of all of your recurring expenses and identifying what’s a necessary expense and what’s not.
You might also be able to lower monthly bills through negotiation. For example, cell phone and cable bills are often negotiable.
Do: Stay motivated
More than half (59 percent) of U.S. adults feel uncomfortable with their level of emergency savings, according to Bankrate’s 2025 Emergency Savings Report.
Saving money can be stressful and difficult, especially when trying to stay consistent and motivated.
Some helpful ways to motivate yourself to improve your finances include the following:
- Setting goals
- Drawing from the success of those around you
- Learning from past mistakes to help avoid taking on new debt
- Be willing to accept mistakes you make along the way
Don’t: Take on extra debt due to large, unnecessary purchases
When it comes to your money and surviving a recession, one major pitfall you should try to avoid is accumulating extra debt due to large, unnecessary purchases.
“Economic uncertainty is a time for reducing debt and boosting savings, not the other way around,” Bankrate’s McBride says.
One of the ways Americans commonly take on debt is holiday shopping, when it can be tempting to charge gifts on a credit card or use buy now, pay later services — both of which can result in hefty interest charges if not paid off in time. Some advance planning, including setting aside money each month throughout the year, can help you avoid such debt pitfalls.
Don’t: Accumulate high-interest debt
Consumers may need to take on some amount of debt in order to afford the necessities in times of recession, especially if inflation is elevated. While it’s not ideal, there are a few steps you can take to soften the hit.
The first step is to try and avoid high-interest debt at all costs, which is typically associated with credit cards. One way to avoid this is to look into credit cards that offer introductory zero percent promotional interest periods or balance transfers to such credit cards.
While these zero percent promotional rates don’t last forever, they can save you from accumulating interest on essential purchases while you work to get back on your feet.
Don’t: Be discouraged by low savings rates
While savings account rates at many brick-and-mortar banks remain at rock bottom, yields at many online banks and credit unions have stayed far above the national average despite the Federal Reserve’s interest rate cuts in the past year.
Brick-and-mortar banks often pay an annual percentage yield (APY) of around 0.01 percent on a savings account, while many other online banks currently offer APYs of 4 percent or higher.
These rates may not be as high as they were in early 2024, but they still make a bank account a valuable place to store your money.
For example, if you kept $10,000 in an account that earned 0.01 percent APY for a year, you’d earn $1 in interest. But if you kept that same amount in an account that earned 4 percent APY, you’d have an extra $407.42 at the end of the year.
Additionally, storing your money in a savings account is one of the safest places to keep it in a recession if you choose a bank with FDIC insurance.
Don’t: Lose sight of long-term financial goals
It’s important to consider both your short- and long-term financial goals when it comes to saving money. While you may be more focused on just surviving during tough economic times, it’s important to be thinking about your future.
“The route to financial security is to be saving for both emergencies and retirement, not just one at the risk of the other,” says Bankrate’s McBride.
Michele Lee Fine, RICP, CEO and founder of Cornerstone Wealth Advisory in New York City, suggests evaluating your retirement portfolio to ensure it’s targeted toward your retirement age and risk tolerance.
“If you are further away from retirement, you have more time to get through and recover from market volatility and down markets,” Fine says. “If you are closer to retirement, make sure that you are gradually starting to mitigate risk, looking more at creating passive income streams for the near future that will be sustainable.”
Whether you start planning for your golden years early in your career, or you’re getting off to a later start, finding the best retirement plan for your individual circumstances can help maximize your return.
Bottom line
Saving money and paying down debt are key to financial wellness, especially during times of recession and rising prices. Staying on track can be possible when you put effective strategies in place and remain motivated to increase your savings and eliminate debt.
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