Transfer Your Credit Card Debt

Best Online and Neobank Savings Accounts

FIND THE BEST BANK FOR YOU

Cheap Stocks to Buy Now

Best Cryptocurrency to Invest In

FIND THE BEST BANK FOR YOU

Best Balance Transfer Credit Cards

Best Cash Back Credit Cards

FIND THE BEST CARD FOR YOU

GEN Z: The Future of Finance

Best Student Loan Refinance Options

FIND THE BEST BANK FOR YOU

GEN Z: The Future of Finance

FIND THE BEST BANK FOR YOU

FIND THE BEST BANK FOR YOU

GEN Z: The Future of Finances

FIND THE BEST BANK FOR YOU

GEN Z: The Future of Finance

Many of the offers appearing on this site are from advertisers from which this website receives compensation for being listed here. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). These offers do not represent all available deposit, investment, loan or credit products.

You want to keep your money safe, especially heading toward a possible recession. Keeping some money in a savings account makes sense, but does it stay safe in a recession?

Assuming that you’ve chosen a reputable bank, the answer is no — you will not lose money that you’ve deposited in a savings account, even during a recession. Reputable banks maintain insurance from the federal government, which protects the money in your account even in times of recession.

More From Your Money: Choose a high-interest saving, checking, CD, or investing account from our list of top banks to start saving today.

While your money might lose value considering the opportunity cost that comes with keeping your money in a low-interest savings account versus a conservative mutual fund or ETF focused on beating inflation, you won’t see your bank implement new fees, charges or deductions just because the value of the dollar drops.

Banks are able to keep your money safe during times of recession by providing FDIC insurance on all savings accounts up to $250,000 per depositor. FDIC insurance is issued by the Federal Deposit Insurance Corporation, which backs its coverage with the full faith and credit of the U.S. Treasury.

FDIC insurance is important, because it protects your money in the event that your bank goes under or cannot provide all of its customers with immediate access to the funds that they hold in their accounts. The government offers FDIC insurance on checking and savings accounts at reputable banks and credit unions because it wants to encourage Americans to keep their money in secure accounts, where there is less risk of loss when compared to holding cash.

While the federal government does not have the power to guarantee that a bank, credit union or other lender will never go bankrupt, it can guarantee a “bailout” for you as the account holder.

For example, imagine that you have a savings account with $10,000 set aside for emergencies. If the bank that you have the account with goes bankrupt, it might not have the assets on hand to pay back your money. In this event, the bank’s FDIC insurance will reimburse you for the balance you had in your account. This is true both in times of recession and during periods of economic expansion.

Note that FDIC insurance will not cover every type of banking or investing account. FDIC deposit insurance covers:

FDIC deposit insurance does not cover:

FDIC coverage protects your funds up to $250,000 per insured bank. This means that if you have more than $250,000 in assets in a single covered account, you will benefit from only $250,000 worth of protection. If you have more than $250,000 in assets to protect, you can benefit by placing no more than $250,000 in a single FDIC-insured account, spreading the funds between multiple institutions.

More From Your Money: Choose a high-interest saving, checking, CD, or investing account from our list of top banks to start saving today.

Savings account holders who feel like a recession might be on the horizon can take steps to protect their funds if the value of the dollar takes a turn. By holding money in a savings or checking account with a reputable, FDIC-insured bank or credit union, you can take advantage of protections from the federal government.

You can also take steps to learn more about alternative investments, which are sometimes used to hedge against recessions and inflation. Note that if you buy stocks, bonds or other securities, you are not entitled to a bailout from the federal government to restore your losses. Never invest more than you can afford to lose.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.

Get advice on achieving your financial goals and stay up to date on the day's top financial stories.

By clicking the 'Subscribe Now' button, you agree to our Terms of Use and Privacy Policy. You can click on the 'unsubscribe' link in the email at anytime.

Advertiser Disclosure: Many of the offers appearing on this site are from advertisers from which this website receives compensation for being listed here. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). These offers do not represent all deposit accounts available.

© 2023 GOBankingRates. All Right Reserved.

Sign up for our daily newsletter for the latest financial news and trending topics.

For our full Privacy Policy, click here.