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How a high-yield savings account can protect you in a recession

A high-yield savings account is a wise investment in any economy, but especially when times are tough. Getty Images/iStockphoto

If there's one thing we've learned from high inflation and interest rate hikes, it's the importance of having a solid plan to protect your money. And now that there's a recession on the horizon, it's more important than ever.

A high-yield savings account can ensure your financial well-being in the face of job loss, income reduction and other recession-related effects. It's a wise choice in any economy, but it can be especially beneficial when times are tough.

If you're looking to safeguard your financial future from a recession, read on to find out why a high-yield account might be the smartest move you can make.

Learn how much you could be earning with a high-yield savings account by checking current rates here.

How a high-yield savings account can protect you in a recession

A high-yield savings account has many benefits. Here are three big ones that help you weather a recession.

It delivers higher earnings than a regular savings account

When the dollar is weak, every extra cent you earn is invaluable. Keeping your money in a high-yield savings account can ensure you earn as much interest as possible. Consider that regular savings account rates currently average about 0.24%. High-yield account rates range from about 4% to about 5% — roughly 15 to 20 times higher.

Here's what that could look like for you: Say you have $5,000 to deposit. If you put that money in a regular savings account at 0.24%, you'll earn $12.50 in interest after 12 months. Put that money in a high-yield savings account at 5% and you'll earn $250 instead. When the purchasing power of your dollars is down, an extra $237.50 could make a big difference.

Reap the reward of a high-yield savings account today! View your account options online now.

Your money is shielded from losses

Whatever the economy is doing, your money is safe in a high-yield savings account. Your earnings may decrease if the federal funds rate goes down, but your initial deposit and the interest you've earned so far won't be affected.

Plus, if your account is held by an FDIC-insured bank or NCUA-insured credit union, it's protected up to $250,00 per account, per institution.

It serves as a cash reserve

Recessions can be rough on your finances. You're at higher risk of losing your job, and it may be tougher to make ends meet. When you need extra cash, you can turn to your high-yield savings account.

As long as you mind any potential monthly withdrawal limits, you can access your funds as needed with no penalty. And accounts with limits often allow you up to six withdrawals per month, which may be enough to get you through most pinches. Other high-yield financial products, such as CDs, aren't as liquid.

The bottom line

While news of a recession may have you nervous, there are steps you can take today to safeguard your money. Opening a high-yield savings account is one of them. With its earning potential, liquidity and deposit insurance protections, you can rest easy knowing your money isn't going anywhere and you have a ready source of funds when times get rocky.

You can find the best high-yield savings account for you by doing your homework and comparing lender offers. Get started by checking out current rates here.

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