Stock Market Crashing? What You Need to Know and How to Prepare

When markets take a nosedive, it’s easy to feel like you’re standing at the edge of a financial cliff. Is the stock market crashing? What should you do? Let’s cut through the noise and talk about what really matters when the market decides to throw a tantrum.

---

Use MoneyLion’s emergency fund calculator* to discover how much you need to save for life’s unexpected moments.

---

Is the stock market crashing or just correcting?

First things first—let’s get our terminology straight. Not every bad day in the market is a crash.

A stock market correction is a decline of 10% or more from recent highs. These happen fairly regularly, about once per year on average.

A stock market crash is a sudden, steep decline of 20% or more over a short period, often just days or weeks. True crashes don’t happen often, but when they do, they make headlines.

Thus far in 2025, the stock market has seen significant volatility but not a crash. As of closing on March 13th, major indexes had fallen down by 10% from their recent record highs, and the market has technically entered correction territory—a situation that merits attention but differs from a full-scale crash.

What happens if the stock market crashes?

When the stock market takes a serious tumble, here’s what typically unfolds:

• Values drop rapidly: Your portfolio statement might look scary for a while
• Volatility increases: Expect wild swings in both directions
• Fear takes over: Media headlines get dramatic
• Some investors panic-sell: Potentially creating opportunities for those who stay calm

The truth is, what happens to the overall market matters less than what happens in your personal financial life. A crash is only truly devastating if you’re forced to sell at the bottom.

Next stock market crash prediction: can anyone really know?

Let’s be candid—anyone who claims to know exactly when the next market crash is coming is either fooling themselves or trying to fool you. Market crash predictions are like weather forecasts for next year: educated guesses at best.

What we do know is that markets move in cycles. Expansions are followed by contractions. Bulls eventually give way to bears. The real question isn’t if a market crash is coming, but how you’ll respond when it does.

What to do when the stock market crashes

When your portfolio’s looking more like a horror movie than a success story, here’s some insights for what to do when stocks go down:

1. Don’t panic: Seriously. Take a deep breath. Making hasty decisions based on emotion is the financial equivalent of texting your ex at 2 AM—rarely a good idea.

2. Remember your time horizon: If you won’t need the money for years or decades, today’s crash could be tomorrow’s blip on the radar. The longer your time horizon, the less a current downturn could matter.

3. Check your asset allocation: Is your portfolio still aligned with your risk tolerance and goals? Sometimes a market drop is your wake-up call to make adjustments.

4. Consider dollar-cost averaging: Continuing to invest regularly through downturns means buying more shares when prices are lower. Future You might look back on this market crash as a shopping spree opportunity. Just keep in mind that there’s no guanarantee an investment vehicle will eventually rebound.

Potential places to store your cash during a market downturn

When the market’s throwing a temper tantrum, having some of your money in calmer waters can help you sleep at night.

High-yield savings accounts: Offer better interest rates than traditional savings while keeping your money accessible for emergencies or opportunities. Learn more here. 

Certificates of Deposit (CDs): Provide fixed interest rates for a specific time period, typically offering higher yields in exchange for locking up your money.

Money market funds: Invest in short-term, high-quality securities that aim to maintain a stable value while providing modest returns.

Preparing for the next stock market downturn

Instead of obsessing over the next market crash coming, focus on preparing your finances to weather any storm:

Build that emergency fund: Your first line of defense against forced selling

Diversify across asset classes: Not just different stocks, but different types of investments

Pay down high-interest debt: Market returns are never guaranteed, but debt interest is

Keep some powder dry: Having cash available lets you capitalize on opportunities

Invest regularly: Automatic investments can help remove emotion from the equation

Market crash coming? Keeping perspective

Markets will rise and fall, just like they always have. It’s impossible to predict when the stock market crash will come or when markets will enter a boom. What matters most isn’t timing the market, but how your financial plan accounts for inevitable volatility. 

FAQs