Guide to Money Management and Investing During a Recession

Updated: July 6, 2024

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Layoffs. Rising interest rates. Grocery bills that keep climbing higher. During a recession, the economy experiences a decline in growth, production and employment. The value of assets like stocks and real estate often fall as well.

With many financial pitfalls to navigate, do you know where to put money during a recession? Understanding the right saving and investing strategies to pursue during a recession can help you survive and thrive thanks to new financial opportunities.

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Money Management Strategies

A recession involves a decline in economic activity lasting a few months to several years. Instead of panicking, remember that “cash is king” and to have enough in emergency savings to guard against possible unemployment. Since cash loses buying power over time due to inflation, a high-yield savings account is a great place to put your savings.

If you are in debt, balance paying it off with growing your savings to avoid going deeper into debt. You should also review your budget to find ways to trim your expenses. If you lose your job, apply for unemployment insurance right away to reduce the need to tap into your savings.

Tips for Saving in a Recession

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    Reassess your budget

    Look for unnecessary spending that can be trimmed. Consider canceling subscriptions or memberships that you don’t use, cutting down on going out for meals or creating a food budget for eating at home. If you’ve never created a budget before, learning how to budget is essential.

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    Start and build an emergency fund

    When creating an emergency fund, grow your savings to three to six months’ salary to cover for emergencies like job loss or medical needs. Once you determine the amount you’ll need, set a monthly savings goal. Add any extra money you receive, including gifts, tax refunds or work bonuses, to the emergency fund.

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    Increase savings

    There are many ways to start saving money. Automate your savings using an app that sets aside a certain amount each week, switch bank accounts to one with no fees and a high-yield interest rate or sell unwanted items around the house and put aside the extra money.

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    Eliminate debt

    Debt, especially high interest debt, can eat into your budget. Make it a point to implement strategies to get out of debt so that you can use the money you currently spend on debt payments toward increasing your savings or investing.

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"Inflation may lead to a recession, but it is not necessarily part of a recession. In most cases, prices decline during a recession (which is known as deflation, not inflation) due to lower consumer and business disposable income."
Lee Huffman

Tips for Saving in a Recession

What to Establish Before Investing

Many experts think recessions present an opportunity for investing. But how do you know if it’s the right move for you? Once you create a solid emergency fund and pay off debts like credit card debt, investing could be a wise decision. It’s important to wait until you establish these things before increasing the amount of money you invest.

You should also continue contributing to company-sponsored retirement plans to receive the company match. Ongoing investments also take advantage of dollar-cost averaging to buy shares at lower prices during a recession. Certified financial planner Jill Fopiano shares, “Having the discipline to stay invested throughout market cycles usually leads to the best result.”

Create a solid emergency fund

It’s important to feel confident that you have enough money in an emergency fund in the event that you or a family member become unemployed. Considering the amounts you might need to spend on food, housing and potential medical costs, could you cover three to six months of expenses until you find another job?

Pay off credit card debts

Credit card debt can prevent financial security, especially when it seems like monthly payments mostly go toward the interest. Rising interest rates only make the situation worse. Make an effort to tackle this high interest debt first. Organize your bills and consider debt consolidation or a balance transfer credit card to tackle your debt. Switch to a cash budget if overspending is an issue.

Contribute to existing retirement accounts

Especially during a recession, it’s important to continue making contributions to any sponsored retirement plans. You'll be able to buy more shares at lower prices during a market downturn. If there is room in the budget, consider increasing your contributions while the stock market is lower.

What to Invest in During a Crisis

What to Invest in During a Crisis

While no investment is guaranteed to be recession-proof, looking at investments that have weathered economic storms previously can offer lessons for the future. Implementing wise investing strategies can also be important.

Investing during a recession should be approached with careful consideration. Investors need to think about their short and long-term financial goals. It might be wise to avoid industries catering to wants as opposed to needs since discretionary spending tends to decline in economic downturns.


Fixed-income investments help preserve capital and are less risky than stocks. Government bonds, money markets and certificates of deposit (CDs) are examples of these investments. They can be purchased from banks, brokerage firms or government websites.

During a recession, fixed-income investments offer guaranteed returns matching the interest rates offered on the investment. Bond issuers might default on repayment if the issuer has financial problems.



Bonds are attractive to investors because they collect the interest payments and get the principal back when the bond matures.

A bond is basically a loan a consumer is making to a corporation or the government. They are best for those who are closer to retirement or are risk-averse. During recessions, bonds have outperformed stocks and cash because bond values increase as interest rates decline.

Most investors hold bonds for a duration of one to ten years. Currently (May 2023), short-term bonds are yielding more than mid and long-term bonds, which is a historical indication of a pending recession. Private bonds tend to offer higher interest rates than government bonds since their risk level is higher.

This chart shows the monthly trend of ten year treasury bond rates in the United States from May 2013 to June 2022.

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Some bonds are more secure than others, which is reflected in a higher rating by independent rating agencies, like Moody’s or Standard & Poor’s. Government bonds are more reliable than corporate bonds because of the potential to raise taxes to ensure repayment. The safest types of bonds are U.S. Treasury Bonds.

Treasury Bills (T-Bills)


A Treasury Bill is a short-term debt obligation issued by the U.S. Department of the Treasury. They mature in four to 52 weeks, offer a guaranteed interest rate and are backed by the U.S. government.

Since Treasury Bills are backed by the U.S. government, they offer a guaranteed return on investment. Interest is paid when the bill matures, and you can invest up to $10 million dollars. During a recession, they are attractive to investors as a low-risk investment that provides guaranteed income and repayment. You can purchase them from Treasury Direct.

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The risks of Treasury Bills are that they offer lower interest rates and potentially tie up money that could be put into higher-performing assets. As inflation rises, the interest payments may underperform other potential investments and you may get less than face value if you sell before maturity.

Money Market Funds


Money market funds are pools of cash-like securities that have a stable value and offer higher returns than traditional savings accounts.

Money market funds are a type of mutual fund and can include low-risk investments like U.S. Treasury securities, certificates of deposits (CDs) or cash. They are best for those looking for temporary places to park cash since they are easily bought and sold. During a recession, they are good for protecting assets since they are relatively safe.

Interest rates are generally slightly higher than bank savings accounts but can be impacted during a recession.

The risks of money market funds are that long-term growth opportunities are limited and interest rates may not keep pace with inflation.

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"Most money market accounts do not charge fees. The costs of management are taken out of the gross investment yield before paying the net yield to investors."
Lee Huffman

Certificates of Deposits (CDs)


A certificate of deposit is a bank account that is attractive to investors because it receives a guaranteed interest rate for a predetermined amount of time and offers FDIC insurance.

CDs are bank accounts with guaranteed interest rates that are generally higher than those offered by savings accounts. They are ideal for those who are risk-averse. However, they do not allow withdrawals during the term of the CD without charging a penalty .While this locks up money for a certain period of time, there isn’t a risk of losing money (up to FDIC insurance limits) with this investment vehicle during a recession.

CD laddering can also be attractive during recessions because it gives you access to money at certain intervals, making your investment slightly more liquid.

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One disadvantage of CDs is that they are less liquid. Investors must leave their money in the CD for the specified duration or incur penalties. Additionally, if interest rates rise during the CD term, you could lose out on additional income from other investment and savings options offering greater returns.


An equity is a share in a company, which is what investors receive when purchasing stocks. Some stocks pay dividends for recurring income, while growth stocks are expected to increase in value over time.

In a recession, equity prices are usually lower, so buying stocks during this time can be profitable in the long-term. Equities are also risky because of the unpredictability of the stock market.

This chart shows the performance of the S&P 500 since 1971. The S&P 500 is a stock market index that contains the top 500 companies with the highest market capitalization, weighted toward larger companies. The chart shows that, historically, there is a rebound following a decline.

Value vs. Growth Stocks

Value stocks are equities being sold below their estimated value. These are usually companies with successful business models that have done well over time. Growth stocks are typically equities from newer and often innovative companies that may not yet have reached their full potential but whose value is expected to grow rapidly.

Value vs. Growth: Key Differences
Value Stock
Growth Stock


Currently undervalued

Currently overvalued

P/E ratio



P/B ratio

Below 1.0

Above 1.0


More likely

Typically no dividends

Risk level

Less risky

More risky

Value stocks generally present more predictable returns and may pay quarterly dividends. Growth stocks typically do not offer dividends and may present a risk if the company fails to perform.

During recessions, investors often choose value stocks for safety, which may mean that the price of growth stocks has declined. Growth stocks, therefore, present an attractive option for investors willing to accept more risk for long-term gains. Value stocks could be better for risk-averse investors.

Defensive vs. Aggressive Stocks

Defensive stock investing is best for risk-averse investors and involves choosing stocks representing companies that offer products or services that people always need. Their value tends to rise slowly over time.

Aggressive investing chooses products that might be risky but present the chance of a quicker, more outsized return. These could include small-cap stocks, emerging markets or high-yield bonds that carry a risk of non-repayment. These strategies are typically better suited for younger investors or those with a long-term investing horizon.

Defensive vs. Aggressive: Key Differences

Defensive Stock

Established company that produces a good or service that will always be needed even during a recession, like food or utilities.

Aggressive Stock

Newer company that may not be profitable but promises potentially outsized returns. May offer an innovative product or service.

During recessions, stocks that are part of a defensive investing strategy continue to do well because they represent companies making a good or service that consumers continue to buy throughout all stages of the economy.

Aggressive stock investing might be more appealing when the economy is on an upswing and investors are taking more risks on new products or emerging markets. But, if you can get a good deal on an aggressive stock during a recession, it could be lucrative.

Historically Recession-Resistant Sectors and Stocks

The following sectors represent examples of stocks that could be part of a strategy of defensive investing.

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    Consumer staples

    Consumer staples include food or household products, food retailers, hygiene products or beverages. During recessions, people continue to buy these items regardless of economic conditions.

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    The utility sector includes companies that provide electricity, water, and sewage. The need for these services does not disappear during a recession.

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    The healthcare sector includes healthcare-related stocks ranging from pharmaceutical companies, hospitals, health insurance and pharmacies. Healthcare needs are generally consistent.

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    Stocks from the energy sector are also considered recession-proof. This sector includes oil, natural gas and electricity.

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    Cost-conscious retail

    While other types of retail stores may suffer, cost-conscious retail outlets tend to continue to thrive in recessions. Many increase revenues as consumers seek cheaper alternatives to everyday items.

Index Funds vs. Individual Stocks

Index funds are a type of mutual fund or exchange-traded fund (ETF) containing a portfolio of stocks modeled after one of the major stock market indexes, such as the S&P 500 or the NASDAQ 100. They simplify investing and minimize risk through diversification.

Buying individual stocks gets you ownership in a company. They are riskier but offer greater potential returns.

Index Funds vs. Individual Stocks: Key Differences

Index Funds

Index funds are lower risk because they give you shares in multiple companies through a single investment, making them ideal for most investors.

Individual Stocks

An individual stock, representing a share of ownership in a single company, may behave independently of the rest of the market, making them riskier.

Individual stocks can be more appealing if the price has dropped substantially and you are looking for big returns. Index funds can be a better choice because you'll own a collection of stocks that reduce wild swings in the value of your investment.

In a recession, index funds are typically the better choice since you get diversification. You may also be able to get them on sale if the market takes a dive, allowing you greater profits over time.

Precious Metals

During recessions, precious metals like gold or silver can serve as a hedge against inflation since they are viewed as a "store of value." Their value often rises with inflation and during periods of uncertainty.

While precious metals can provide diversification to your portfolio, they generally do not provide income to investors.

This chart shows the performance of the gold ETF SPDRF Gold Shares starting in 2004. Since the height of the pandemic in August 2020, gold has traded around the same high levels.


Investors can buy precious metals in physical form through a dealer or as a mutual fund or an ETF from a brokerage account. These funds typically hold actual gold and silver and their share price represents their value, but they can decrease in value rapidly if multiple investors decide to sell.

Real Estate

Real estate investments gain value through appreciation or by providing their owners with monthly income. Real estate can be a good investment since returns can be higher than the stock market. During a recession, real estate can be purchased at discount prices because the market tends to decline.

Investing in real estate is not for everyone. Sometimes it can involve managing property or taking out a loan. Even though it may require a significant amount of money to get started, investing in real estate during a recession can be lucrative if you have the funds.

This chart shows the median sales price of houses sold in the United States from 1963 to present. The 2008 recession resulted in a significant dip in prices, but the overall trend is that real estate prices have risen over time.

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If you don’t want to invest in rental properties, real estate investment trusts (REITs) are worth considering. These are stocks, mutual funds and ETFs that let investors own shares of diversified groups of real estate assets without managing the property themselves. Keep in mind that REITs specializing in office buildings or shopping malls may not have the same returns as ones that include apartment buildings or other types of properties.

Investing Approaches During Recessions

A recession is a normal part of the economic cycle. While no one can predict exactly how long a recession will last, it’s important to implement an investing strategy that accommodates uncertainty.

There are many investments that might make sense based on your situation. Investments carry varying amounts of risk, so it’s important to think about your goals, when you'll need the money, what you should invest in and how much you can invest.

Dollar-Cost Averaging

Dollar-cost averaging involves investing consistent amounts of money over time in the markets. It balances out the cost you pay for equities and allows you to be a more disciplined investor.

During a recession, investors can consistently take advantage of falling asset prices. By investing as prices decrease, you'll buy more shares at a lower cost for the same amount of money. Continuing to invest using the dollar-cost averaging strategy during a downturn yields higher returns over the long-term.

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Your 401K retirement plan is an example of dollar-cost averaging. Each paycheck, you are likely investing the same percentage of your income regardless of market fluctuations.

Lump-Sum Investing

Lump sum investing is when you invest a large sum of money all at once. During a recession, this can be a great strategy if you manage to invest when the market is at its lowest point. There is a higher level of risk involved because if you’re wrong, you may see negative returns in the short-term until the market rises again.


When Tesla first went public, its stock price was $17. A lump-sum investment of $10,000 back then would be worth around $94,000 today.

Fundamental Analysis

Fundamental analysis assesses the value of a stock based on publicly available performance reports and the current economy. If the asset is undervalued, investors will purchase it.

During a recession, many companies might be undervalued, making fundamental analysis helpful because it helps identify good buys. However, the stock market does not always perform in predictable ways, so the asset price might not increase according to predictions.

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An example of fundamental analysis is investing in an established company that is currently trading below its previous highs, has a solid balance sheet and that produces goods people continue to purchase, even in a recession.

Technical Analysis

With technical analysis, investors study the past performance and movement of a stock based on price and volume to predict its future behavior. These patterns then allow them to determine when to buy or sell.

Technical analysis can be complicated to learn, time-consuming and does not consider a company’s fundamentals in deciding whether or not to buy the stock. It might not be the best strategy for those looking to make long-term investments.

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An investor studies a stock that has traded at a relatively consistent volume for several months. It is range-bound, meaning the price never falls above or below a certain range. One day there’s a dramatic increase in volume. The investor interprets this as a signal to buy the stock.


Diversification involves buying stocks from different sized companies, industries and regions of the world. Owning only a small part of an industry or company that might fail protects investors from risk since if one company fails, other investments might make up for the loss. The downside is that you may miss out on bigger returns from companies that are highly successful.

Diversification can also refer not just to owning a diverse portfolio of stocks but also different types of investments, including fixed income investments.

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You build a portfolio of companies, including large, mid and small-cap stocks. If the value of large-cap stocks drops but the mid and small-caps increase in value, your losses could be minimized or offset completely.

Expert Insight on Saving and Investing During a Recession

MoneyGeek interviewed financial experts to get their takes about money management and investment during a recession.

  1. What can be signs of a recession before it comes? What should we pay attention to?
  2. What advice would you give people to manage their money during a recession?
  3. What investments make the most sense during a recession? What investments might people want to avoid?
Peter Zaleski, Ph.D.
Peter Zaleski, Ph.D.Professor of Economics at Villanova University
Jeremy Britton
Jeremy BrittonCo-founder & CFO at
Alexander Fleiss
Alexander FleissChairman and Chief Investment Officer at Rebellion Research Partners
Yaseen Alhaj-Yaseen, Ph.D.
Yaseen Alhaj-Yaseen, Ph.D.Associate Professor of Finance at Middle Georgia State University
Li Cai, Ph.D.
Li Cai, Ph.D.Associate Professor of Finance at IIT Stuart School of Business
Paul Chiou, Ph.D.
Paul Chiou, Ph.D.Director of MathWorks Lab for FinTech and Quantitative Analytics, and Associate Teaching Professor of Finance at Northeastern University
John Longo
John LongoProfessor of Finance at Rutgers Business School
Rebecca Brooks
Rebecca BrooksFinancial Coach and Owner of R&D Financial Coaching
Michal Strahilevitz
Michal StrahilevitzMarketing Professor and Director of the Elfenworks Center for Responsible Business at Saint Mary's College of California
Jeffrey Zheng, FCAS, FSA, CPCU, CPA, CFEI, AIDAAssistant Professor of Practice at Temple University
Jill Fopiano
Jill FopianoPresident and CEO of O’Brien Wealth Partners

Additional Resources

There are many online resources available to help those who want to learn more about recessions, savings or investing. We’ve compiled a list of a few worth checking out.

  • EDGAR Database: Published by the U.S. Securities and Exchange Commission, EDGAR is a database providing free public access to corporate information, such as quarterly and annual reports, as well as information provided by mutual funds.
  • Federal Reserve: The Federal Reserve serves as the central bank for the U.S. It works to maintain the operation of the U.S. economy and is responsible for things like interest rate hikes.
  • FINRA.ORG: The Financial Industry Regulatory Authority (FINRA) is a government-authorized nonprofit organization that conducts oversight of brokerages and other entities that sell securities to investors. Also contains a useful free education library for investors.
  • First Generation Investors: Nonprofit that teaches high school students in underserved communities the power of investment.
  • Girls Who Invest: Nonprofit that offers fully funded education programs in investment management.
  • Published by the SEC’s Office of Investor Education and Advocacy, this government website contains investment calculators, articles and other useful tools to help consumers make sound investment decisions.
  • Operation Hope: Operation Hope promotes financial literacy in underserved communities.
  • Treasury Direct: Official government website where investors can buy treasury bonds.
  • U.S. Bureau of Labor Statistics: Provides insights into which industries are hiring and which might be experiencing layoffs or lags in employment.
  • U.S. Department of Labor: Offers resources to help workers and unemployed people.
  • Women’s Institute for Financial Education: Nonprofit organization dedicated to promoting financial education for women.

About Rachel Newcomb, Ph.D.

Rachel Newcomb, Ph.D. headshot

Dr. Rachel Newcomb is an award-winning writer and the chair of anthropology at Rollins College. She has over two decades of research experience both internationally and domestically. She has published multiple books and articles on USA Today, HuffPost, The Economist and The Washington Post. She also contributes finance articles to MoneyGeek.

Dr. Newcomb earned her doctorate in anthropology from Princeton University.