Should You Keep Saving During a Recession? Yep. Having savings goals is never a bad idea, even during a recession.
An emergency fund can be especially helpful during the economic uncertainty of a recession. Not only can it help tide you over, but it can also help you stay invested, giving your investments time to rise again. You don't want to have to touch your investments in the middle of a recession just to pay your bills.
It's especially important to have savings during a recession, however, because economic uncertainty can create other financial concerns, such as layoffs. A surprise job loss can be stressful, but if you're cushioned with an emergency fund, it can be easier to pay for your expenses until you get a new position.
Higher interest rates that often coincide with the early stages of a recession provide an advantage to savers, while lower interest rates moving out of a recession can benefit homebuyers. Investors may be able to find bargains on assets that have decreased in price during a recession.
Recessions can impact your savings in many different ways. Lower interest rates, stock market volatility, and potential job loss can drain your savings. Diversifying your investments, building an emergency fund, and opening a high-yield savings account can help protect your savings.
Even during recessions, consumers need to buy food, drugs, hygiene products, and medical supplies. These are consumer staples, which are the last items to be cut from the family budget.
In general, a recession lasts anywhere from six to 18 months. For example, the Great Recession that started in December 2007 lasted 18 months. But the recession prompted by the pandemic in 2020 only lasted two months. When a recession is on the horizon, it's impossible to know how long it will last.
The Australian economy entered a recession after GDP fell 0.3% in Q1 2020 and a whopping 7% in Q2 2020 - the steepest contraction in the nation's recorded history. Prior to this economic anomaly, the last time Australia endured a recession was 1990-1991.
Despite more than a year of consistent recession predictions from Wall Street's top minds and dozens of Fortune 500 CEOs, the U.S. economy has remained remarkably resilient in 2023.
Industries affected most include retail, restaurants, travel/tourism, leisure/hospitality, service purveyors, real estate, & manufacturing/warehouse.
During an economic downturn, it's crucial to control your spending. Try to avoid taking on new debt you don't need, like a house or car. Look critically at smaller expenses, too — there's no reason to keep paying for things you don't use.
What would a recession mean for Australia? If Australia enters a recession, many people will have a tough time, whether through job loss, home loss, or even just a struggle to pay the bills. Whole markets will tank or lose significant value and many businesses will likely go bankrupt.
A term deposit.
Deposits up to $250,000 in savings accounts and term deposits with Australian banks are protected by the government, so if something were to happen to the bank (which is unlikely), your deposit would be safe.
Australia could face per-capita (if not actual) recession
The panel is forecasting Australian economic growth of just 1.2% in 2023 – the lowest rate outside a recession in more than 30 years, climbing to just 1.5% in the year to June 2024 and 2.3% in the year to June 2025.
Think about staying invested if you can
Historically speaking, investors who hold on to their investments through recessions see their portfolios completely recover, and individuals who don't invest in the market at all lose out.
Ready.gov recommends you keep a small sum at home and the rest of your savings in an emergency savings account. Exactly how much to stash at home comes down to your family size and your daily expenses.
As a result of the Great Recession, the United States alone lost more than 8.7 million jobs, according to the U.S. Bureau of Labor Statistics, doubling the unemployment rate. Further, U.S. households lost roughly $19 trillion in net worth as the stock market plunged, according to the U.S. Department of the Treasury.
Companies that make basic necessities like consumer staples and food will always have demand, even during an economic downturn - as people need to prepare meals, wash, clean, and so on. Discount stores often do relatively better during recessions because their staple products are cheaper.
Fewer jobs and higher unemployment abound
One unfortunate truth of recessions is that millions of people often lose their jobs. As spending slows and the economy shrinks, business profits go down, too. To keep their profit margins afloat, they often slow hiring and start firing to trim the budget.
What are some examples of businesses that thrive in recession? Due to the elasticity of demand, recession-proof industries are usually in essential services, like health care, senior services, grocery stores, and maintenance, such as plumbing and electrical.
A recession is a widespread economic decline that typically lasts between two and 18 months. 1 A depression is a more severe downturn that lasts for years. The most famous depression in U.S. history was the Great Depression. It lasted a decade.