Where's the Best Place to Keep Your Money in a Recession?

CNET

08-05-2025

The best place for your cash depends on what you want to use it for.
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If your retirement funds took a hit with the recent stock market plunge, you probably know we could be facing an economic downturn. A recession could put your finances at risk, threatening jobs and hard-earned savings.
An unstable economy doesn't mean you should keep all your cash under the mattress, though. You should never keep all your money in just one place, period.
Knowing the best places to put your dollars can help protect your finances from market turbulence. From your everyday spending cash to your long-term savings, here's where your money will be safest and work the hardest for you.
Where to keep your spending money in a recession
Rewards checking account
Even if your paycheck is directly deposited into your checking account, you shouldn't keep all your money there.
Your checking account funds should cover everyday spending and bills, plus a cushion for other expenses. The rest of your cash should be in an account that earns a high interest rate so it can grow. Plus, when you keep money earmarked for savings in a separate account, you're not tempted to dip into it.
That said, you can still get returns with the right checking account. Some top high-yield checking accounts offer APYs up to 3.30%, far better than the 0% you'll get with a typical checking account.
Why not earn some interest on your spending money if you can? With prices high across the board, every little bit helps.
Where to keep your emergency fund in a recession
High-yield savings account
An emergency fund is a must-have at any time but especially when the economy is shaky. Whether you're hit with a layoff or a sudden medical bill, your emergency fund can help you avoid going into debt to cover your expenses.
The best place to keep an emergency fund is in a high-yield savings account where your money is easily accessible when you need it. Unlike traditional savings accounts, top HYSAs earn annual percentage yields more than 10 times the national average, with some as high as 4.4% APY.
With a higher yield, you'll benefit from compounding interest. That's when you're not just earning interest on your initial deposit but accumulating interest on top of the interest you already earned. Your money grows faster, giving you a bigger balance to draw from when the time comes.
Where to keep savings for short-term goals in a recession
Certificate of deposit
If you're saving for a goal in the near future -- like buying a car or paying for home repairs -- a certificate of deposit is a smart option. Unlike savings accounts, which have variable rates, CDs offer a fixed rate that's locked in when you open the account. That means your earnings will never drop and your returns are guaranteed, regardless of what's happening in the economy.
You must keep your money in the CD for the full term to avoid early withdrawal penalties. But with terms ranging from a few months to several years, it's easy to find a CD that fits your timeline. In fact, the early withdrawal fee can discourage you from tapping into your funds before you really need them.
Where to keep savings for long-term goals in a recession
It depends
The best place for long-term savings goals depends on the goal. Retirement savings are best in tax-advantaged retirement accounts (more on that below) but you have plenty of options for other goals.
For example, if you're saving for your child's college fund, consider a 529 plan. These state-sponsored savings plans allow relatives and other individuals to put aside money for a child's education and come with tax benefits like tax-free withdrawals if the money is used for educational expenses.
You could also consider a low-risk government-backed investment like an I bond, which can preserve your purchasing power in the face of inflation.
If you're saving for a down payment on a house, consider the pros and cons of accounts like homebuyer savings accounts, high-yield savings accounts and CDs.
Where to keep your retirement savings in a recession
Tax-advantaged retirement funds
Retirement accounts like 401(k)s and IRAs are designed to help you maximize your tax advantages. Depending on the account you choose, you'll either pay taxes now or when you withdraw the funds, allowing you to account for a potentially lower income in retirement.
If your employer offers contribution matching on a retirement savings plan, it's essentially free money to boost your nest egg.
While brief stock market swings can cause panic, investing is still critical for long-term financial stability. The S&P 500 has historically delivered an annual return of about 10% for investors who stick it out over decades. Instead of trying to beat the market, focus more on your ideal investing strategy. A robo-advisor can help.
That said, if you're nearing retirement age, you may want to rebalance and diversify your portfolio so more of your retirement fund is in low-risk assets like bonds.