It’s scary to think about the number of Americans who are walking around without so much as a dollar in the bank. Around 25% of all U.S. households live paycheck to paycheck with no savings to fall back on, according to 2024 data from Bank of America. So if you have a modest savings account balance, you’re in far better shape than people in that boat.
Motley Fool Money reports that the median savings balance in the U.S. is $8,000. And if your savings balance is similar, you may be pretty happy with it — as you should be.
But it also may not hurt to try to boost your savings balance before the end of the year. Here’s why.
1. You’re worried about a 2025 recession
The Federal Reserve currently puts the likelihood of a recession over the next 12 months at 57%. That’s a scary thought. But it also doesn’t guarantee an economic downturn by any means.
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And remember, some recessions are fairly short-lived. The economy could slump for two or three months in the new year before gaining steam. So there’s definitely no need to work yourself into a panic.
At the same time, it’s never a bad thing to be recession-ready. And that means having enough money in savings to cover at least three months of essential expenses.
A three-month emergency fund could give you nice protection against a layoff, allowing you to cover your basic bills without immediately resorting to credit card debt. So if you’re not quite at the three-month mark, now’s the time to work on boosting your savings.
The good news is that it may be easier than usual to pick up a side hustle at this time of the year. Many businesses need more hands on deck during the holiday season, so take the opportunity to line up a temporary gig that puts extra cash in your pocket.
2. You’re saving for a specific goal in the new year
The Federal Reserve is expected to keep cutting interest rates in the coming year. That could make it less expensive to sign a mortgage or finance a car.
If buying a home or vehicle is a goal you’re gearing up for in 2025, or if you have a different financial goal you’re looking to pull off, then that’s reason enough to boost your savings. In the case of a loan, even with interest rates dropping, you’re still paying extra money for the privilege of borrowing. So the more you’re able to put down on a purchase like a home or a car, the less you might spend on interest all-in.
Savings account rates are still pretty strong, even though the Fed started cutting rates this year. But next year, savings accounts could start to pay a lot less. So if you want to capitalize on higher interest rates, try to sneak more money into your savings account before the end of 2024.
And if you’re not super thrilled with the interest rate your current bank is paying, don’t settle for less. Instead, shop around for a better one. Check out this list of the best high-yield savings accounts to get started.
Boosting your savings account balance before the end of the year isn’t easy — especially with the holidays coming up. But adding to your savings could set you up to withstand an economic downturn as necessary, meet a big financial goal, or simply enjoy today’s higher interest rates while they’re still available.
