Got stimulus funds? Here's why you should stick that cash in the bank.
The recently signed $1.9 trillion coronavirus relief bill includes a round of $1,400 stimulus payments, and that money has already begun to hit recipients' bank accounts. Many people need stimulus cash to cover near-term expenses like rent, utilities, and food. But if you're still working and able to cover your bills, you may be tempted to use your stimulus money to splurge a little. After all, we've put up with the pandemic for over a year, and wanting to indulge a bit is understandable. But as much as we may want to spend those funds, here are three reasons to consider putting that money into a savings account instead.
1. You don't know when the next emergency could strike
Life seems to have a habit of throwing unpleasant financial surprises our way, and there's no telling when anyone's next "out of the blue" bill might arise. Maybe your car will break down and leave you with a giant repair bill. Maybe your home's air-conditioning system will decide it's had enough right as summer approaches. You never know when unplanned expenses might creep up, so having extra savings in the bank can often prevent you from racking up debt.
2. The economy still isn't great
In April of 2020, the U.S. unemployment rate peaked at 14.7%. By February, it dropped to 6.2%. That's encouraging, but the jobless rate one year prior -- before the pandemic -- was only 3.5%. While there's reason to hope the economy will continue to improve, especially as coronavirus vaccines are increasingly available, a lot of jobs aren't as secure as they could be. And having extra money in savings could be just what gets you through a period of unemployment.
3. This could be our last stimulus round
This recent $1,400 stimulus check is the third one that's gone out. It also may be the last. If the economy continues to improve -- something worth rooting for -- there won't be a need for a fourth stimulus. Even if lawmakers do send one out, it could be a lot more targeted than the previous rounds. In other words, if the stimulus is a windfall for you, it may be your last, at least during the pandemic. It's something to consider if you're choosing whether to spend or save.
Many Americans have struggled during the pandemic, while others have boosted their savings -- largely by banking funds from canceled trips and other activities the pandemic put on hold. If you're doing well savings-wise and aren't worried about losing your job, then you may feel comfortable spending your stimulus on something fun or something that will improve your quality of life. But if your savings could use a boost and you're iffy about your job, then consider holding on to your $1,400.
Of course, there's another option, too. You can save part of your stimulus and spend some of it on something that will make you happy. Depending on your circumstances, that middle ground solution could be your best bet. That way, you do something for the long term, but you also get to bring yourself a little joy, which is something we all deserve at the moment.
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