The coronavirus crisis has dragged on for close to a year now, and at this point, a lot of people are tired of being cooped up at home and having their lives upended. But while those struggles are legitimate, we can't overlook the fact that millions of Americans are still out of work and need financial relief in a big way.
Thankfully, the next dose of relief is already in the works. President Biden's $1.9 trillion coronavirus aid package is already moving forward, and there's a good chance it'll be signed into law by mid-March. Once that happens, millions of Americans will be in line for a third stimulus check, this time worth $1,400.
Given that the last stimulus check came to just $600, a $1,400 payment is a much more substantial windfall. But here's some even better news -- if you don't need that money to cover basic expenses, you have an easy opportunity to put it to work by investing it. And if you do, you could turn that $1,400 into 10 times as much money.
It's all about long-term growth
Investing over a long period of time is a great way to grow wealth because as your portfolio increases in value, you can keep reinvesting your gains for added benefit. Let's say you get a $1,400 stimulus check this year and you invest it in an S&P 500 index fund. (If you're not familiar with index funds, they're passively managed funds that aim to match the performance of the market indexes they're tied to. You won't beat the market with index funds, but you can still do quite well.)
If you leave that money alone for 30 years, there's a good chance you'll enjoy an average annual 8% return on your investment -- that's actually a bit below the S&P 500's average. And in that case, in three decades' time, you'll have turned your $1,400 stimulus check into a little over $14,000.
Of course, you don't have to invest your stimulus in S&P 500 index funds, or any index funds, for that matter. The upside of choosing an S&P 500 index fund is that you're effectively investing in the 500 largest publicly traded companies without having to do a ton of research. But if you're up to the challenge, you can handpick a group of stocks with solid growth potential instead. Either way, if you're willing to invest your stimulus cash rather than spend it, you could end up reaping some pretty solid financial rewards.
To be clear, if you're having trouble paying your bills or you don't already have a solid emergency fund -- one with enough money to cover three to six months' worth of living expenses -- then you shouldn't invest your stimulus money. Rather, stick it in the bank and use it to cover essentials or pad your savings account.
But if you're all set in those regards, investing your stimulus could easily turn your $1,400 payday into $14,000 -- or even more.