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If the recent financial news wasn’t tough enough for you, there’s a new worry to add to your list: an impending recession.
Among the recently released March MinutesThe Federal Reserve predicted a “mild recession” after 2023 This prediction comes later High inflation, Increase in interest rates And Bank failure That already has people struggling financially. A recession – even a mild one – can add to the misery with high unemployment, low purchasing power and falling stock markets.
With this possibility on the horizon, now is the time to make sure your money is protected. In this article, we’ll look at two ways to do this.
Check out the high-yield savings account rates here to find out if this type of account is right for you.
How to protect your money from a recession
You can prepare for a recession by putting your money in any of the following places.
A high-yield savings account
High Yield Savings Account do the same as Regular savings account, but they provide a significantly higher yield (hence the name). Right now, the average interest rate on a regular savings account is around 0.25%, while high-yield account rates are around 4% to 5%. It is about 15 to 20 times more.
What does this mean for your money? Let’s say you deposit $5,000 in a regular savings account at 0.25%. After 12 months, you will have earned $12.50 in interest. Put that money in a high-yield savings account at 5%, and you’ll earn $250
At a time when affordability is down, as it is in a recession, every little bit helps. You can withdraw funds from your high-yield account at any time (though keep in mind that some banks may have monthly withdrawal limits).
Plus, you can rest easy knowing your money safe In a high-yield savings account. Although interest rates fluctuate based on the federal funds rate, you won’t lose anything from your initial deposit or the interest you’ve earned. If you deposit your money at an FDIC-insured bank or NCUA-insured credit union, it is protected up to $250,00 per account per institution.
Explore current high-yield savings account rates now to see how much more you can earn
Certificate of Deposit (CD)
A Certificate of Deposit (CD) Another good place to put your money in a recession. CD rate Comparable to high-yield savings account rates — currently, they stand at around 5%. CDs have some similarities to high-yield accounts with FDIC or NCUA protection, but they have some key difference.
Unlike high-yield savings accounts, CD rates are fixed when you open the account. If you open a CD at the start of a recession when interest rates are high, you’ll be able to lock in a higher rate altogether. Position of CDEven if interest rates fall.
Also, unlike savings accounts, you can’t access your CD funds until maturity unless you’re willing to pay a penalty. Since CD terms typically range from six months to five years, you should make sure you can leave your money in the account until maturity. You can ensure regular access to your funds through this CD ladderOr open multiple CDs with different term lengths so that they mature regularly.
Compare today’s CD offers by checking current rates here.
Bottom line
If you’re worried about your financial security in the face of a recession, you can take steps now to protect it.
Both high-yield savings accounts and CDs can keep your money safe and allow you to earn interest that can come in handy when things get tough. To maximize your earnings, you can open both types of accounts, capitalizing on CD earnings while ensuring ready cash access with a high-yield savings account.
Start exploring your options now by looking at high-yield savings accounts and CD rates
MoneyWatch: Managing Your Money
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