Two recent Fed Rate changes and pending recession rumors have created plenty of buzz in the finance world, and more importantly, concern in many American households. Savers who started the year with aggressive financial goals are struggling to secure high returns on savings deposits and other investments. Economic uncertainty has savers wondering where to invest their money for the best rate of return or if they should abandon those goals altogether.
Whether you’re already a committed saver or have yet to open your first savings account, establishing financial goals remains a crucial component of building a stable financial future before, during, and after an economic recession.
What are financial goals?
Financial goals are money priorities based on specific savings, spending, or income targets. Establishing goals for your money encourages accountability and often results in a consistent savings habit which can help your money grow faster.
Are financial goals important during a recession?
Yes. Effective financial goal setting requires periodic review to determine whether the strategies used to reach a specific goal are producing the desired results. While savers may still contribute the same amount each month toward their savings goal, recent Fed Rate decreases have made it harder for those funds to grow at a rapid pace. However, putting the brakes on monthly savings contributions will delay the time it takes to reach the goal. Savers should instead re-assess their deposit accounts and make changes as needed.
Is there a financial goal that should take priority during a recession?
An emergency fund totaling three to six months of living expenses should be the first financial goal for most households. Financial advisors recommend keeping funds in a liquid asset, such as a savings account. This makes it easier to access funds quickly with minimal financial consequences.
Emergency funds are reserved for those unpredictable expenses and act as a personal insurance policy against life’s financial surprises. Money can cover such things as a car transmission repair, a water heater replacement, an emergency room visit, or payment of bills during periods of unemployment.
Funds set aside in a dedicated emergency account are a better alternative than accessing fixed assets, such as employer-sponsored retirement accounts, to cover unexpected expenses. The potential early withdrawal penalties and fees can negate gains made over the years.
Use these tips to build an emergency fund in three easy steps.
1. Establish your emergency fund amount goal. Review your budget and total your monthly expenses, then multiply that figure by the number of months you aim to cover with the account. Will it be equal to three months of living expenses? Four months? Six months of living expenses might seem overwhelming to new savers, so starting with a three-month goal is a step in the right direction.
2. Review your budget to determine how soon you’ll fund the account. Are you able to temporarily reduce or eliminate monthly expenses and funnel those funds into the account? Is a part-time job a quicker path to funding the account? The answer to these and other budget-related questions will help you figure out how long it will take to reach your goal. Add extra money you receive from tax refunds, income raises, or other cash windfalls to quickly increase your emergency fund.
3. Open a high-yield savings account and make consistent deposits until you reach your goal. SkyOne Federal Credit Union is committed to providing competitive returns on deposits regardless of a member’s savings goals. The Sky-high Savings Account is ideal for members focused on building an emergency fund. It gives members ready access to funds and provides an annual percentage yield (APY) significantly higher than most other banks or credit unions.
Incurring more credit card debt or taking out new loans while trying to build an emergency fund can work against your financial goals. The more expenses in your budget, the larger your emergency fund will need to be. Discontinue credit card use and only make the minimum required credit payments while building your emergency fund.
Gaining high returns during a pending recession can be challenging. SkyOne makes it less complicated by offering members access to strong earnings for both liquid and fixed assets. If you’re ready to start building your emergency fund, consider a liquid asset with a competitive APY such as the Sky-high Savings Account.
Once you reach your emergency fund goal, add a fixed asset to your financial arsenal. SkyOne’s 13-month Share Certificate invites members to receive even higher returns on their deposits. Earn a guaranteed 2.25% APY*, despite Fed Rate reductions.
Contact SkyOne today for guidance with opening an account that can help you achieve your financial goals, regardless of the economic climate.
*APY=Annual Percentage Yield. APY on certificates assumes quarterly compounding and is slightly less for terms less than 12 months. To earn 2.25% APY*, the Certificate must have a minimum amount of $1,000 and a minimum of 13-month term. Rates and terms are accurate as of 10.08.19 and are subject to change at any time. Credit Union membership is required. Unless you indicate otherwise, at the time of maturity the share certificate will be renewed to a 12-month term at the then-current rate in effect. In the event of a withdrawal before your certificate term matures: certificates with terms from six months to one year are subject to a penalty equal to a loss of 90 days dividends; certificate terms greater than one year are subject to a penalty equal to a loss of 180 days dividends; dividends will be paid prior to imposing the penalty. Early withdrawal penalties apply. Fees may reduce earnings on the account.