Investment in Gold and Precious Metals: Many wealthy individuals turned to gold and other precious metals as a safe haven during economic instability. This was particularly relevant as the US was still on the gold standard at the beginning of the Depression.
Cash (you need to cover your expenses, specially when contemplating such a disastrous scenario); Stocks in energy companies, food, e-commerce and financial services (things people don't stay without, no matter how bad the depression); Gold (gold bars in places where it is common, like India, or gold ETFs).
Diversify into investments.
If you're worried about banks failing, you can begin looking at safer investments as a place to put your money. Assets like Treasury bonds tend to do quite well during recessions for exactly this reason. They may not give a significant return, but you know you'll get your money back.
Your money is safe in a bank, even during an economic decline like a recession. Up to $250,000 per depositor, per account ownership category, is protected by the FDIC or NCUA at a federally insured financial institution.
Inflation Is Eating Away at Your Funds
According to the Bureau of Labor Statistics, the average rate of inflation from April 2023 to April 2024 was 3.4%. If you've been keeping your money in a savings account with a lower yield than the rate of inflation, you should switch over to a higher-yield account.
The best performing investments during the Depression were government bonds (many corporations stopped paying interest on their bonds) and annuities.
The Depression
In all, 9,000 banks failed--taking with them $7 billion in depositors' assets. And in the 1930s there was no such thing as deposit insurance--this was a New Deal reform. When a bank failed the depositors were simply left without a penny.
In the context of a recession, “cash” typically refers to physical currency as well as liquidity in the form of savings and money-market accounts at your bank. These types of accounts help you avoid the stock market's inevitable ebb and flow, and ride out an economic downturn.
There are rules of thumb as to how the individual asset classes usually behave – such as the stock market flourishing in times of economic boom, government bonds being significantly less risky investments than stocks, and gold shining the most in times of crisis.
Gold is typically seen as a safe investment, which is why it's a popular investment in times of recession. “Due to its reputation for being a safe-haven asset, gold tends to perform well during a recession,” per Bloomberg. The metal is up nearly 46% for the year.
Where Is the Safest Place To Keep Cash? Deposit accounts—like savings accounts, CDs, MMAs, and checking accounts—are a safe place to keep money because consumer deposits are insured for up to $250,000, either by the FDIC or NCUA.
If a person's depression is severe or potentially life-threatening, contact a health care provider, a mental health provider or emergency medical services.
The government generally can't take money out of your bank account unless you have an unpaid tax bill (and before they go to that extreme, they will send you several notifications and offer you multiple opportunities to pay your outstanding taxes).
Electricity, automobiles, and other new inventions drove economic efficiencies and started new industries. Financial institutions grew as more people opened savings accounts and took out loans to buy modern luxuries, like cars. Despite some regional declines, the stock market continued to hit new highs.
In most cases, when a bank fails, another bank acquires the failing institution, and your direct deposits are automatically routed to an account at the new bank.
Not everyone, however, lost money during the worst economic downturn in American history. Business titans such as William Boeing and Walter Chrysler actually grew their fortunes during the Great Depression.
$50,000 in 1930 is equivalent in purchasing power to about $944,589.82 today, an increase of $894,589.82 over 95 years. The dollar had an average inflation rate of 3.14% per year between 1930 and today, producing a cumulative price increase of 1,789.18%.
Purchase Precious Metal Investments
Precious metals, like gold and silver, tend to perform well during market slowdowns. But since the demand for these kinds of commodities often increases during recessions, their prices usually go up, too. You can invest in precious metals in a few different ways.
Treasurys, says Collins, are similar to government and corporate bonds, as they are backed by the full faith and credit of the U.S. government. They are typically seen as safe investments during a recession. "In times of market volatility, investors may flock toward Treasury bonds, seeking stability," he says.
High-quality, dividend-paying stocks in defensive sectors like utilities, healthcare, and consumer staples can provide relative stability and income. Gold and other precious metals typically perform well during market turmoil as investors seek tangible stores of value.
In other words, if you have a solid financial plan, and your 401(k) is well-optimized, sometimes the best thing to do in a market downturn is to stay the course, especially if you are a younger investor with years until retirement.