4 Savings Tips for an Uncertain Economy

Uncertain economic times can be nerve-racking. Market swings and grim headlines can spark worries about your money and overall financial security.

While it can be hard to predict exactly what a downturn might look like or how long it could last, there are steps you could take to help you feel more confident about your savings and your ability to weather economic headwinds.

1. Revisit your spending

Tracking your spending can be especially important during times of economic uncertainty. If you haven’t checked in on your budget in a while, take a fresh look to see where your money is coming and going.

What are the essential expenses? Which ones could be reduced or eliminated? When you can visualize and understand your cash flow, you can better identify areas where you can free up cash and reallocate those dollars to your savings goals like your emergency fund, which can provide a critical safety net and peace of mind when you need it most.

For your emergency cash reserve, aim to have enough to cover at least three to six months of living expenses. However, in a shaky economy, you may want to build a bigger cash cushion if you’re in a position to save more.

Charting your expenses is admittedly not the most exciting task, but there are many online tools available that can help monitor your spending, set budget categories, and alert you if you’re going over your spending limits.

2. Make your savings work harder

One way you could save more without having to change your spending is by moving your cash into a high-yield savings account, where it can earn a more competitive APY (compared to a traditional savings account).

High-yield savings accounts can be a great place to park money for your emergency fund or any other short-term goal because you can easily withdraw your money when you need it (note: some accounts may limit the number of withdrawals you can make each month; check with your bank for details).

Another savings tool that could put your money to work earning interest is a certificate of deposit (CD). CDs typically offer a higher APY than savings accounts, with many offering fixed rates over a set term, usually from six months to several years.

With a fixed-rate CD, you can get a predictable rate of return, even during periods of economic uncertainty when interest rates may fluctuate.

3. Continue making retirement contributions if you can

During a downturn, it may seem like a good time to pull back on your retirement contributions and dedicate that money elsewhere. But when saving for retirement, it’s important to stay consistent and take the long view despite short-term market disruptions. Pausing your contributions could impact your ability to reach your retirement goals.

Keep in mind that ups and downs in the markets are normal, but staying level-headed during times of volatility may be easier said than done. This is why you may want to reach out to your financial advisor to review your retirement plan together and go over any concerns you may have before making any changes.

4. Make the most of your tax refund

If you received a tax refund this year or will be getting one soon, consider putting that toward your savings. Depending on your goals, you could stash it in a high-yield savings account to give your emergency fund a boost, open a CD to put away money for a long-term goal, or make a contribution to your retirement account(s).