When I checked my bank account last week, I noticed a large deposit. In the bustle surrounding the COVID-19 pandemic, I hadn't paid attention to when and how the government's stimulus checks would be handed out.

What should you do with that money? 

  • Invest in individual stocks?
  • Put it in a rainy-day fund?
  • Run out and make a splashy purchase you would have otherwise never dreamed of?

In the end, my family needed to come up with a bigger philosophical question to guide our decision. But once we settled on it, everything else fell into place.

Man holds information about Coronavirus stimulus checks

Image source: Getty Images

The guiding question

My wife and I quickly coalesced around a common theme: responsibility. Of course, we always want to be responsible with our finances, but especially in these turbulent times. So the question is: What does responsible spending look like in the face of COVID-19?

The past two months have been a nightmare for many Americans. People are physically sick, emotionally scared, and increasingly out of work. As a nation, we've never experienced a surge in unemployment like what we're seeing today.

I highlight this as a backdrop to say this: My family is lucky. We are healthy and employed. We are grateful for both of those things. If this wasn't the case -- and if they aren't for you -- then spending a stimulus check to meet basic needs is absolutely the responsible thing to do.

Our situation allows a little more flexibility. In the end, we're putting our money into three big buckets.

Emergency fund

As economic news (unemployment, for example) gets worse, the stock market keeps rising. There are lots of explanations for this, but it's confusing nonetheless.

Don't let it give you a false sense of security. Because of the inter-connectedness of our world, large-scale events (like COVID-19) can have unpredictable effects.

What do I mean by that? When this virus appeared on my radar in January, my thinking progressed like this (over many weeks):

  • The death rate seems low, how serious can this be?
  • Well, it's pretty contagious. We might have to think about closing schools.
  • Wait. If we close schools, that means lots of other places will probably have to close! 
  • If they close, then how are people going to stay in their jobs?
  • How are people going to pay rent?

This is obviously oversimplified, but hopefully you get the point. It is impossible to tell if, when, and how the next domino will fall, let alone whether or not it will affect you.

Because of this, my wife and I decided to increase cash in our emergency fund. It could already cover four months of expenses without income. In January we began increasing it. With the stimulus check, we now have six months stored away in cash should the next cascade hit us.

Large-purchase savings

After helping us reach that goal, we took a look around and wanted to see if there were any major purchases we'd be making. I'm not talking about vacations or a new car -- I'm talking the basics (remember the theme: responsibility).

A few things popped up on our list: Our house will need a new roof in the next five years, for instance. And my wife's phone has been hanging on by a thread for quite some time. If we devote a chunk of our money to an account for said large purchases, that would also be a responsible use of our cash.


The third chunk of our stimulus check is going toward providing relief to others, like The Motley Fool has. A simple appeal to humanity can convince most people that helping others meet their basic needs -- food, rent, keeping the heat turned on -- is important.

But even for those unmoved, there's a compelling self-interest dynamic as well. If this pandemic has taught us anything, it's how interconnected we all are. While the more fortunate might financially survive the (likely) COVID-19 recession, many others won't. Their unmet needs won't disappear. In fact, they will be magnified -- and the cascading effects of those unmet needs can be just as wily as COVID-19 itself.

If it's financially responsible for you to do so, reach out to neighbors, call your local food bank, and consider ordering early and often from locally owned shops and restaurants that are hanging on by a thread. You'll need those people to be around and healthy for a full recovery to ever take place. It's in your -- and your community's -- best interest to prioritize this.

No investments?

You might be surprised to hear that none of this money is going toward safe stock investments. There are two key reasons for this: First, my family will do everything we can to responsibly reduce our downside risk with the volatile markets. Putting money into our emergency fund and saving for unavoidable large purchases does that.

Second, we are lucky enough to have invested regularly through the longest bull market (2009-2020) in modern history. While we aren't financially independent, we were benefactors of pure luck which has left us in a place where we are much closer to meeting our financial goals.

For others, making such investments might make all the sense in the world. Just make sure that you have considered your -- and your immediate community's -- downside risk first.