General Question

mciaglia's avatar

Recession proof my saving account

Asked by mciaglia (7points) March 21st, 2008 from iPhone

is there a way to protect my savings from a recession?

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2 Answers

spywacko's avatar

Unless you have more than $100,000 in an account, you should be okay (

Michael's avatar

It depends on what your concerns are. If you are concerned that the bank which holds your savings will fail as a result of the recession, then spywacko is correct. FDIC insures all accounts in FDIC-insured banks up to $100,000. If you have less than that in your savings account and the bank fails, FDIC will cut you a check for the amount you had in the account. If you have more than that, you can increase your insurance only by transferring some of the money to a different bank (FDIC insures on a per person and per bank basis). All of this is kind of besides the point, however, since it is really unlikely that your bank will be allowed to completely fail.

If, on the other hand, you have noticed that the interest your savings are accruing has been a somewhat diminishing, well that too, is a consequence of the economic environment. When the Fed cuts rates, as it has been doing pretty rapidly, that cut trickles down into every interest rate that affects you (car loans, mortgages, savings accounts, etc). There’s no real way to avoid this. The Fed is deliberately trying to change your incentives. Saving may be good for you, but it’s not so good for a faltering economy. By cutting rates, saving becomes less profitable and many people might decide that now is the time to take some of their savings and spend it (since it’s not accruing much interest right now anyway).

If you’re hell-bent on earning a nice rate of return throughout an economic slowdown, it appears that certain commodities have been good investments. You could take some of your savings and invest them in those sorts of things. But of course, this carries much more risk than a savings account.

If you really just want to get through this recession with the same level of wealth that your started with, keep your money in your savings account, swallow the low interest rates, and sleep well at night.

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