Here's Why Now's a Great Time to Pad Your Savings Account

Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page. APY = Annual Percentage Yield. APYs are subject to change at any time without notice.

KEY POINTS

  • Vanguard expects the U.S. unemployment rate to rise later in 2023.
  • It's a good idea to boost your emergency fund in case your job lands on the chopping block.
  • You can add to your savings by cutting your spending and adding a side hustle to grow your income.

In March, the national unemployment rate was 3.5%, which is a fairly low level of joblessness. Plus, a good 236,000 jobs were added to the U.S. economy that month.

But things may not stay that rosy for much longer. In a recent report, Vanguard says it expects the national unemployment rate to rise to 4.5% to 5% by the end of 2023. That would clearly represent a notable increase from where we are today. And it's also why now's a really good time to add money to your savings account.

Make sure to boost your emergency fund

The combination of persistent rate hikes on the part of the Federal Reserve and the recent banking sector meltdown have the potential to drive the U.S. economy into a recession at some point in 2023. Now to be fair, this news shouldn't come as a shock. Many financial experts spent the latter part of 2022 warning about an impending recession.

Those warnings, however, eased up earlier this year, and it's only now, in the wake of banking industry woes, that they've picked up again. But still, the reality is that we've been at risk for a recession for quite some time. Borrowing has gotten expensive for consumers due to the aforementioned rate hikes. That means everything from credit card balances to personal loans is costing more.

Our Picks for the Best High-Yield Savings Accounts of 2024

APY
up to 4.60%
Rate info Circle with letter I in it. You can earn the maximum APY by having Direct Deposit (no minimum amount required) or by making $5,000 or more in Qualifying Deposits every 30 days. See SoFi Checking and Savings rate sheet at: https://www.sofi.com/legal/banking-rate-sheet.
Min. to earn
$0
APY
5.00%
Rate info Circle with letter I in it. 5.00% APY for balances of $5,000 or more; otherwise, 0.25% APY
Min. to earn
$5,000
APY
4.25%
Rate info Circle with letter I in it. See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening.
Min. to earn
$0

In this sort of environment, consumers might easily decide they've had enough of sky-high borrowing costs and cut back on spending. That could be enough to fuel a recession, which could easily, in turn, lead to an uptick in unemployment levels.

That's why it's so important to give your emergency fund a boost if it could use one. You'll want to make sure that at a minimum, you have enough money in savings to cover three full months of essential living expenses. If you don't, start cutting your personal spending now and consider working a side job to bring your savings up to that point.

The reason it's so important to be able to cover three months of bills is that if you were to lose your job, it might easily take that long to find another one -- especially during a recession, when jobs may not exactly be plentiful. In fact, it's a smart idea to save enough to cover a good six to 12 months of expenses if you have a family and a lot of financial responsibilities, such as a car payment and mortgage. But three months' worth of bills should be the minimum you keep in savings.

How worried should workers be?

The idea of losing a job can be scary, so you might be nervous about yours being yanked away. The harsh reality is that a large number of Americans might very well lose their jobs at some point in 2023. And while growing your skills might spare you from getting laid off, that's unfortunately not guaranteed, either. But if you have a fully loaded emergency fund, a layoff may not be as large a concern.

Sure, nobody wants to find themselves unemployed. But if you do your part to boost your savings, you'll get the peace of mind that comes with knowing you'll be able to pay your bills while you look for work.

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Two of our top online savings account picks:

Rates as of Jun 19, 2024 Ratings Methodology
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SoFi Checking and Savings Capital One 360 Performance Savings
Member FDIC. Member FDIC.
Rating image, 4.50 out of 5 stars.
4.50/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
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= Poor
Rating image, 4.00 out of 5 stars.
4.00/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair
= Poor

APY: up to 4.60%

APY: 4.25%

Min. to earn APY: $0

Min. to earn APY: $0

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