5 Ways to Bolster Your Finances in a Recession | Morgan Stanley (2024)

FAQs

5 Ways to Bolster Your Finances in a Recession | Morgan Stanley? ›

Your money is safe in a bank, even during an economic decline like a recession. Up to $250,000 per depositor, per account ownership category, is protected by the FDIC or NCUA at a federally insured financial institution.

Your money is safe in a bank, even during an economic decline like a recession. Up to $250,000 per depositor, per account ownership category, is protected by the FDIC or NCUA at a federally insured financial institution.

Don't: Take On High-Interest Debt

It's best to avoid racking up high-interest debt during a recession. In fact, the smart move is to slash high-interest debt so you've got more cash on hand. Chances are your highest-interest debt is credit card debt.

Equity Sectors

On the negative side, energy and infrastructure stocks have been the hardest-hit in recent recessions. Companies in these sectors are acutely sensitive to swings in demand. Financials stocks also can suffer during recessions because of a rising default rate and shrinking net interest margins.

CDs are primarily a safe investment. They are guaranteed by the bank to return the principal and interest earned at maturity. CDs can provide modest income during turbulent economic times like recessions when other types of investments often lose value.

What is the best money move in a recession? ›

A better recession strategy is to invest in well-managed companies that have low debt, good cash flow, and strong balance sheets. Countercyclical stocks do well in a recession and experience price appreciation despite the prevailing economic headwinds.

The phrase means that having liquid funds available can be vital because of the flexibility it provides during a crisis.

A downturn is merely a chance to rethink operations and devise a plan to push it forward. The business owners who go on to become multi-millionaires take option two. In fact, it's common that during or soon after a recession there's money on offer, if you are brave enough to go find it.

The short answer is no. Banks cannot take your money without your permission, at least not legally. The Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 per account holder, per bank. If the bank fails, you will return your money to the insured limit.

High-yield savings account

Cash? Yes, cash can be a good investment in the short term, since many recessions often don't last too long. Cash gives you a lot of options.

1. Federal Bonds. The U.S. Treasury and Federal Reserve (Fed) would be more than happy to take your funds and issue you securities in return. A U.S. government bond still qualifies in most textbooks as a risk-free security.

Finance Experts All Say the Same Thing

They all said the same thing: You need three to six months' worth of living expenses in an easily accessible savings account.