The odds of a recession are rising, according to economists. A tumbling stock market, escalating trade tensions with China, a disappointing jobs report, tariffs and worsening consumer sentiment have made for a turbulent first quarter of 2025.
While President Donald Trump says he doesn’t see a U.S. recession on the horizon, according to Bloomberg, financial experts are increasingly cautious. Rather than panic, it’s good to be prepared for a recession, which will inevitably happen at some point.
Here are smart savings strategies that you can use during times of uncertainty and information about the current savings environment before a recession happens.
Understanding the current economic landscape
A recession is defined as two consecutive quarters of negative GDP growth. However, economists often look at a broader set of indicators when assessing recession risk.
Economists closely follow several key indicators:
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The yield curve: An inverted yield curve occurs when short-term yields are higher than longer-term yields. A 3-month Treasury bill (4.33 percent) is relatively flat compared to the 10-year Treasury (4.34 percent) as of March 24. But earlier in the month, this curve was inverted, with the 3-month Treasury bill having a higher yield than a 10-year Treasury.
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Unemployment trends: High or rising unemployment can mean that the economy is in weakening.
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Consumer sentiment: Declining sentiment can be a sign that consumers either don’t have money to spend or are choosing to cutback on spending.
One thing is clear: inflation is still elevated, says Greg McBride, CFA, Bankrate chief financial analyst, even though it’s significantly lower than it was a couple of years ago.
“It’s improved, but it’s still elevated relative to the target of 2 percent,” McBride says.
It’s still a great time for savers
Five percent has a ring to it. Though you’re unlikely to earn a yield of 5 percent APY or higher on a savings account at a Federal Deposit Insurance Corp. (FDIC) bank, savers are actually in a better environment than when the top yield was a little more than 5 percent APY almost two years ago.
“I like (5 percent) a lot better when inflation is well below 5 percent,” McBride says.
Back in March 2023, the top savings yield that Bankrate tracks was 5.02 percent APY. But inflation was 5 percent, so the real rate of return – the amount you’re outpacing inflation – was only 2 basis points.
“Loss of buying power is as damaging as a loss of principal,” McBride says.
In February 2025, 4.55 percent APY was the highest-yielding savings account that Bankrate tracked and inflation was 2.8 percent. So that top yield was outpacing inflation by 175 basis points. Inflation has decreased faster — and more — than savings APYs.
“Rates while not at the highest level in the past few years, they’re still above what anyone has seen for the past several years,” says Joe Bartolotta, senior vice president at Salem Five Bank in Salem, Massachusetts. “And that’s certainly good news for people who are savers. Particularly older Americans who are looking for a safe investment and a fair yield on those deposits.”
5 smart steps to take with your money before a recession
1. Secure your emergency fund
Building – or adding to – an emergency fund are things to do when things are good, not when you experience a job loss or an inevitable emergency happens.
“Nothing helps you sleep better at night than knowing you’ve got some money tucked away,” McBride says.
The primary reasons to have money in a savings account are safety and liquidity, McBride says.
“Return takes a backseat to safety and liquidity,” McBride says. “But you still want to earn the most competitive return you can. You can’t compromise your safety and liquidity needs to chase returns in higher-risk investments.”
You can start or add to your emergency fund using split direct deposit, which splits your direct deposit and has part of it go into a high-yield savings account and the rest into a checking account to pay bills and for other expenses.
2. Reduce your high-interest debt
Reducing your high-interest debt is also something to do when things are good – before a recession. Focus on variable-rate loans, especially credit cards with variable interest rates.
According to Bankrate’s 2025 credit card debt survey, 48% of credit cardholders carry debt from month to month. Those balances become significantly more burdensome during periods of income disruption that often come with recessions.
Consider these debt elimination strategies:
- Debt avalanche method: Focus on highest-interest debt first.
- Debt consolidation: Consider a fixed-rate personal loan to simplify and potentially reduce interest costs.
- Balance transfer: If your credit score is strong, explore 0 percent APR balance transfer offers.
- Accelerated payment plan: Allocate any extra funds to debt reduction now, while your income is more stable.
3. Revisit your broader savings strategy
There’s a chance your bank might communicate when lowering your APY. But you really need to be proactively checking your monthly statement – or your bank’s website or app – on a monthly basis and compare your yield with top-savings yields.
Depositors realize they have the power with the deposits because banks need deposits, says Nicole Lorch, president and chief operating officer at First Internet Bank.
“Right now, it’s a seller’s market for deposits,” Lorch says. “And they’re realizing they can go anywhere with their deposits – they don’t have to just use the bank down the street.”
Compare your APY to make sure it’s still competitive. But a rate decrease, or a yield that’s a few basis points away from another top bank, isn’t necessarily a reason to switch banks — unless there are other reasons you’d like to change.
4. Consider different savings vehicles based on your timeline
Some consumers will have CDs maturing that were earning higher yields. Savers should always think about the purpose of the money before deciding whether it should go into a CD, savings account or be invested.
With potential rate cuts on the horizon, a CD ladder or a CD could make sense — depending on what your money is being earmarked for. Even with the Fed’s forecast, no one knows what will happen this year in the economy and with rates.
Those toward the end of their savings goal — a person a year away from retirement, a person who has accumulated savings for a wedding later this year, or a person with a 17-year-old attending college soon — might want to consider putting their money in an FDIC-insured savings account, money market account or CD.
Make sure your balance is within FDIC insurance limits and guidelines. Money in securities could earn more than an FDIC-insured deposit product, but it could also lose value at a time when you’re very close to your savings finish line.
5. Strengthen your overall financial position
Beyond savings and investment strategies, consider these tips:
- Review and reduce unnecessary expenses: Making a budget can help you understand what you’re spending your money on and can help you find saving opportunities.
- Consider secondary income sources: Another job can help you earn more and help you if you lose one of your jobs.
- Delay major optional purchases: Now might be the time, if possible, to wait on purchases that aren’t necessary. Saving that money now might help you down the road with the current economic uncertainty.
- Invest in marketable skills: This investment in yourself can help you in a highly competitive job market that has a high unemployment rate.
Bottom line
Preparation beats panic. Those who fail to plan, plan to fail. Now’s the time to plan for the next inevitable recession.
Depending on your time horizon of financial goals and risk tolerance, that might require immediate action. But in some cases, staying the course might be the best way to navigate rough waters in the economy.
Make sure you have an emergency fund, your money is covered under FDIC insurance and you’re budgeting and using that to find saving opportunities.
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