Worried about a Recession? Don’t panic, Be Prepared
How to protect savings from a recession is the biggest question faced by today’s world. Studies have shown that those people who have enough savings have survived the worst of the times. Recession and job loss always comes hand in hand. The biggest concern during those times is liquidity. During this financial hardship, people fear that their savings might get dwindled up, so to withstand, one must keep an emergency fund to get through their day to day living.
Ways to Protect Savings During a Recession
We have shared various ways to protect savings during recessions. These methods include:
Have an Emergency Fund
The emergency fund becomes your best friend during a time of recession. The rule of thumb says that a person should be capable of funding at least six months of expenses, though larger funds might be required, given the rise of uncertainty. Park your money in emergency funds such that they can be liquidated when necessary. It can be kept in Savings Account, Sweep in Accounts, Fixed Deposits, Liquid Funds, Short Term Debt Funds. We have to become more cautious about the behavior of impulse buying and avoid buying non- essentials. Living frugally can be an excellent strategy. Find ways to live frugally and learn how to live effectively during a recession.
Build Up Some Cash
Cash has always proven one of the best investments during a recession. Why? The most prominent reason being safety, a 1.5% yield looks pretty good compared to 10% loss in share market. Invest more in money market instruments; mainly government securities.
Invest Your Money Wisely
You can invest in companies like consumer staples.
Keep Your Portfolio Diverse
The more the money that is spread out, the more likely a portion of it will remain intact in the phenomenon of a recession. Invest in gold, as it is “the safest”. During a recession, investors tend to flock to the safety of gold. An expert says investing in gold ETF and sovereign gold bonds provide the investor with safety and convenience. You need to analyze and adjust risk tolerance. Don’t be late in dealing with the current situation.
Avoid Investing in Property
One should handle their debt creatively during the time of peril and many times people will end up dipping into savings to pay the debt. One should find an alternative source of income that can cater to you during these times. If in case you have lost your job during a crisis, then investigate into government programs. The federal government is trying to assist through Coronavirus Aid Economic Security Fund. With some careful financial planning, you will not have to worry about your savings.
Conclusion
When the economy is down, money is tight. You won’t have to run on credit if you have protected your savings during the recession; plan for the worst. You should view the recession as a wakeup call to review your balance sheet of savings. Shield your savings from recession.
