Worried Your Savings Won't Hold Up in a Recession? Do This

It's a simple move that could bail you out of a financial jam.

Will a recession strike in 2023? That's a big question a lot of people want answers to. And without a crystal ball, the best answer anyone can really give right now is "we'll just have to wait and see."

Why are so many experts so concerned about an economic decline? The Federal Reserve has been aggressively raising interest rates in the hopes of slowing the pace of inflation. The logic is that if borrowing gets too expensive for consumers, they'll start to spend less. Once that happens, it should narrow the gap between supply and demand that caused the rampant inflation we've all been dealing with for well over a year.

But if consumer spending declines to an extreme degree in the coming months, it could spur a recession. And that could bring about a period of widespread unemployment.

If that's a concern of yours, it's understandable. The idea of losing your job can be scary, especially if you don't have a whole lot of savings to tap in that sort of scenario.

But if that's the case, there's one easy move you can make today to put yourself in a better position to get through a recession. And it's a move worth making before economic conditions take a turn for the worse.

Make sure you're getting the best return on your money

The Federal Reserve's interest rate hikes have made borrowing more expensive across the board. But one positive thing that's come out of those rate hikes is that banks are finally paying higher interest rates on savings accounts and certificates of deposit.

If you're worried your savings won't hold up well in a recession, do yourself a favor and see what interest rate your bank is currently paying. And then compare that rate to what other banks are offering up. If your bank's interest rate falls short, then it pays to move your money over to a bank that's paying more generously. The more interest you're able to earn on your money, the longer your savings are likely to last.

Look to online banks for higher interest rates

If you're doing your banking at a physical bank but are eager to snag a higher interest rate on your savings, then it could pay to switch over to an online bank. Online banks don't tend to have the same amount of overhead as brick and mortar establishments. As such, they're commonly able to pass that cost savings on to banking customers in the form of more generous interest rates.

We don't know whether the economy is going to worsen in 2023 or not. And there's nothing wrong with taking an optimistic view and hoping that things won't deteriorate. At the same time, it's important to prepare for a recession in case economic conditions worsen drastically. And the higher an interest rate you're able to get on your savings, the more financial protection you'll buy yourself, especially if you end up having to tap your cash reserves in the event of a layoff.