How To Recession-Proof Your Savings

Samantha Miller

A recession can put a major dent in your savings if you’re not prepared. With the right strategies, you can recession-proof your savings so your money is protected when the economy takes a downturn. Here are some tips on how to safeguard your savings during a financial crisis.

Reduce Unnecessary Spending

One of the best ways to prepare your savings for a recession is to cut back on discretionary spending now. Take a close look at your monthly budget and identify areas where you can reduce spending on wants rather than needs. For example, you may be able to cancel unused subscriptions, dine out less, or reduce entertainment costs. Getting your spending under control when times are good will make it much easier to weather a recession.

Build Up Your Emergency Fund

A fully-funded emergency fund is a must-have before a recession hits. Most experts recommend having at least 3-6 months of living expenses set aside in a savings account. If you don’t have that much yet, make building your emergency fund a top priority. Aim to set aside a portion of each paycheck until you reach that target amount. Having a healthy emergency fund means you won’t have to tap into long-term savings or retirement accounts when a recession causes financial hardship.

Pay Down High-Interest Debt

Entering a recession while carrying a heavy debt load can be financially devastating. Now is the time to get aggressive about paying down credit card balances, personal loans, or other debts charging high interest rates. Funnel any extra cash into eliminating those debts so you aren’t stuck making monthly payments on borrowed money when times get tough. Paying off debt will give your savings room to breathe.

Diversify Your Income Streams

One of the biggest threats to savings during a recession is job loss. If you rely on a single employer for all your income, it puts your savings at risk. Consider diversifying your income streams by starting a side business, monetizing a hobby, or investing in assets like real estate that can generate passive income. Having diverse income streams can provide stability if your main job is impacted by a downturn.

Trim Variable Expenses

Take stock of your variable monthly expenses to identify areas for cuts if needed. For example, you may currently pay for high-end cell phone plans, cable packages, or gym memberships. Look for opportunities to reduce those costs or switch to more affordable options. Locking in savings on monthly bills puts your savings in a better position to withstand a downturn.

Rebalance Your Investment Portfolio

As a recession approaches, it’s wise to rebalance your investment portfolio so that it’s primed for an economic downturn. That may mean shifting a higher percentage to low-risk securities like bonds and cash equivalents which tend to hold up better in recessions. Limit your exposure to volatile sectors like certain tech stocks. Work closely with a financial advisor to create a recession-resistant investment allocation.

Consider Consolidating Retirement Accounts

If you have multiple 401(k)s and IRAs from previous jobs, consider rolling those balances into a single IRA account. Spreading your retirement savings across multiple accounts makes them more vulnerable to market swings. Consolidating into one IRA gives you clearer oversight of your investment strategy so you can adjust your asset allocation ahead of a recession. This helps avoid significant losses.

Boost Your Emergency Savings

Even if you already have a healthy emergency fund, it doesn’t hurt to bulk it up even more leading up to a recession. Having an extra robust savings cushion means you won’t have to stress if you go a few months without income. Aim to have at least 9-12 months of living expenses in your emergency fund as extra protection.

Add Some Defensive Savings

Your emergency fund should be easily accessible in checking or savings accounts. But you can further insulate your savings by keeping some in defensive assets like Treasury bills, short-term bond funds, certificates of deposit (CDs), money market accounts, and cash value life insurance. These assets tend to be more recession-resistant so your savings are diversified.

Maintain Healthy Credit

Entering a recession with damaged credit and a low credit score makes you vulnerable. Lenders often tighten lending requirements during downturns. To ensure you have access to credit if needed, maintain healthy credit by paying bills on time, keeping credit card balances low, avoiding new hard inquiries, and monitoring your credit reports for errors.

Create a Recession Survival Budget

One powerful recession-proofing step is to create a lean survival budget you can live on if economic conditions force you to reduce spending. List out necessary expenses like housing, food, transportation, and insurance. Look for areas to trim so you can get by on less. Having this recession budget ready can give you confidence your savings can survive a worst-case scenario.

Stay Calm and Avoid Panic

Major news events and market crashes can incite panic when a recession seems imminent. But allowing fear and anxiety to guide your financial decisions often leads to loss. Stay the course with your long-term investment strategy and avoid liquidating holdings at the wrong time. With the right preparations, you can recession-proof your savings.


A recession can put savings at risk through job loss, market declines, and economic uncertainty. But with some strategic planning – reducing expenses, paying off debt, diversifying income, bulking up emergency savings, rebalancing investment portfolios, and creating a recession budget – you can take proactive steps to protect your hard-earned money. While a recession often feels outside of your control, you do have power to fortify your savings against potential threats and minimize recession damage.

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Samantha Miller is a business and finance journalist with over 10 years of experience covering the latest news and trends shaping the corporate landscape. She began her career at The Wall Street Journal, where she reported on major companies and industry developments. Now, Samantha serve as a senior business writer for, profiling influential executives and providing in-depth analysis on business and financial topics.
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