COVID-19 has not only battered the stock market but ravaged the U.S. economy, and with unemployment claims coming in at such a rapid pace that they're overwhelming online filing systems, it's clear that Americans are desperate for relief. So Congress has cooked up a plan to send money to those who might need it the most via a stimulus check.

As of this writing, eligible adults will receive $1,200 apiece, plus $500 per child, via that stimulus. There are income limits, however, that will render higher earners ineligible for relief. Specifically, this benefit starts to phase out for single tax filers with incomes of $75,000 or higher and joint filers with incomes of $150,000 or higher. For those without children, single filers earning more than $99,000 and joint filers earning more than $198,000 are looking at no stimulus at all.

Woman smiling and holding up arms as bills float around her.


That said, a large number of Americans will indeed qualify for a stimulus check, and if you're one of them, it's important to know how to spend that money -- and also how not to spend it.

A smart way to use your stimulus cash

If you've been let go from your job and are struggling to pay for basics, your stimulus check should go toward essentials like food, medications, and other things you need to buy immediately. If you're still earning a paycheck and therefore have a means of covering your near-term needs, assess your emergency fund. Generally speaking, you should have enough money in there to cover three to six months of essential living costs, and given the fact that we might be heading into a full-blown recession, hitting the high end of that range is a good idea right about now. If your emergency savings need work, stick that stimulus check directly into the bank -- and leave that money alone until you need it.

Of course, if you're good on both near-term expenses and emergency savings, you might consider investing that money. Stock prices have dropped dramatically in the wake of COVID-19, so now's a good time to load up on quality investments while they're more affordable.

What you shouldn't do with your stimulus cash

When you get a lump sum out of the blue, it's easy to be tempted to spend that money on something that will bring you joy -- say, a new TV to soften the blow of being cooped up at home or some new clothing to enjoy once social distancing becomes a thing of the past and you're ready to mingle in society again. But before you spend that money on something that offers instant gratification, remember that your economic picture today might not be the picture you see two or three months from now.

It's too soon to tell how badly the U.S. economy will be damaged, but unless you're absolutely rolling in emergency cash, take that money and stick it in the bank rather than spend it. Your earnings might be steady today, but if things get worse, that may not be the case several months down the line.

Also, do not invest your stimulus check if you're behind on emergency savings. Investing is a smart thing to do when you're looking at money you know you won't need for another 10 years. But if you only have, say, a month's worth of living expenses in the bank, assume you may need that stimulus money in the near future, and stash it in a savings account where it's nice and accessible.

Right now, there's no specific timeline for when stimulus checks will go out. Though there's talk of them arriving in April, Americans could wind up waiting until May to get that money. The good news about that delay is that it gives you some time to assess your financial situation and decide how to put that cash to good use. And if you're already struggling to make ends meet, hang in there. With any luck, you'll be getting some relief soon enough.