Should You Invest Your Stimulus Check in a High-Yield Savings Account?

by Christy Bieber | Updated July 17, 2021 - First published on April 16, 2020

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Putting your money into a high-yield savings account could be the right choice for three reasons.

Thanks to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, most Americans have already received a lump-sum payment from the government or will have money mailed to them by June. The size of your stimulus check depends on your income and marital status, but payments are worth up to $1,200 per adult and $500 for each dependent child under 17.

If you're one of the many people receiving this money, you'll have to decide what to do with it. One of the best options could be to invest it in a high-yield savings account.

Why a high-yield savings account could be the best option for investing your stimulus check

Putting your stimulus funds into a high-yield savings account makes sense for three primary reasons:

  1. Investing it in a high-yield savings account allows you to earn a decent return while limiting your risk. High-yield savings accounts generally provide a much better return on investment than just leaving the money in your regular checking or low-interest savings account. If you can earn around 2.0% APY in a high-yield account, your $1,200 stimulus check could net you about $24 in interest by year's end. While, theoretically, you could earn a larger return from the stock market, savings accounts are far less risky. That's because savings accounts are insured by the FDIC and thus offer protection for up to $250,000 of your funds per account.
  2. The money is easily accessible in case you need it. Although savings accounts generally limit you to six withdrawals a month, the Federal Reserve Board has temporarily lifted this rule during the COVID-19 crisis. This means that while banks may still restrict you, they no longer have to. Even if your bank has some limits in place, you can still access your money very quickly if you need it during the coronavirus crisis. You won't be tying up the cash as you would by purchasing less liquid investments such as bonds or CDs. And you won't have to worry about having to sell stocks at a loss if you need the money quickly and the market has gone down.
  3. You can keep the money separate from the funds in your checking account. If you just leave the money in your standard checking account, chances are good you'll end up spending it without even really thinking about where it should go. If you have it in a separate savings account, you can avoid tapping that account unless you need to, so the payment can serve as a mini-emergency fund (or you can bulk up your existing emergency fund).

When a high-yield savings account isn't the right choice for your stimulus check

As you can see, there are a few really good reasons to invest your stimulus funds in a high-yield savings account. But that doesn't mean this is the right choice for everyone. In fact, there are a few situations in which doing something else with your money would likely be smarter. You should think about using the money a different way if either of the following are true:

  • You need the money to pay your bills. If you have bills that are due right now and no other way to pay them, it may be a good way to use your stimulus money. While most creditors and landlords are working with customers to avoid late fees or eviction, interest still accrues on debt, and rent is still due. If you don't pay now, you'll just have to pay more later.
  • You already have a hefty savings fund. If you have a lot of emergency savings that you can access easily, you may not need to bulk up your liquid savings account balance. In this case, if you're confident you won't need the money for at least five years, it may make more sense to invest in the stock market and buy some stocks during the coronavirus downturn.

Americans may get a second stimulus check

If you've already spent, saved, or invested your current stimulus check, the good news is that there's a chance you'll receive another one. 

There are multiple proposals on the table to provide Americans with additional funds, including:

  • The HEROES Act: This $3 trillion stimulus relief bill has already passed the House of Representatives. Its proposed stimulus payments maintain the same income limits as the CARES Act, but payments work differently as the Act provides $1,200 for each adult and each dependent up to a maximum of $6,000 per family. In addition to providing more money for each dependent (as the CARES Act offered only $5,000), the HEROES Act also expands which dependents can qualify. While the CARES Act makes funding available for only child dependents under 17, the HEROES Act would offer the extra $1,200 for any dependent. 
  • The Emergency Money for the People Act: This is a proposed bill that hasn't yet received a vote. It would provide up to $2,000 per person aged 16 or over and $500 per qualifying child up to a maximum of three children. Funds would be available for single filers with income up to $130,000 and married couples with income up to $260,000. This Act would also expand who qualifies as a dependent. 
  • The Automatic Boost to Communities Act: This is another proposed bill that hasn't received a vote but that would provide $2,000 in monthly payments for adults and dependents. Payments would last for at least a year, and an additional $1,000 recurring payment would be paid for each adult and dependent for an additional year once the $2,000 payments come to an end. Unlike most other proposals, non-resident aliens would be entitled to receive stimulus funds under this bill.
  • The Monthly Economic Crisis Support Act: This proposal also hasn't received a vote. It would provide $2,000 in monthly payments for adults as well as for up to three dependents. Payments would continue until three months after the coronavirus crisis ends. With this proposal, payments would be phased out for individuals with incomes above $120,000. 

While these stimulus check bills have received some support and the HEROES Act has even passed the House, the U.S. Senate is unlikely to act quickly on adopting any of them. The Senate Majority Leader, Mitch McConnell, has urged more time before additional stimulus funds are made available. And the Senate does not plan to consider additional funding until June, even as the Trump Administration has suggested more direct payments may be needed for American households. 

If you do receive a second stimulus check, you may decide to use it differently than your first. If your first check paid the bills, for example, a subsequent stimulus payment could potentially be available to invest in a high-yield savings account for emergencies. 

Use your stimulus funds in the right way for you

Putting your stimulus check into a high-yield savings account provides a good balance between risk and reward because you can earn a reasonable return on your money without putting it at risk or tying it up so you can't get it easily if you need it. You can check out our guide to the best high-yield savings accounts to find a bank that's offering a good ROI and open an account today. Once you've opened your account you can move your current stimulus payment into it if you've already received it and be ready to deposit any future stimulus money that comes your way.

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