Stimulus Check Update: Wonder How Your Neighbors Are Spending? We Have an Idea
How we're spending our stimulus checks has a lot to do with how we were personally impacted by COVID-19.
A study released earlier this month by the New York Federal Reserve breaks down how we -- and our neighbors -- are spending American Rescue Plan funds. Here, we'll peek into the study and try to parse out why we may be spending our direct stimulus payments the way we are.
Revealed today: Access our expert’s top cash-back credit card pick that could earn you upwards of $1,300, all with no annual fee.
Tucking it away
According to the Fed's study, about 41.6% of us are slipping our stimulus funds into a savings account, just in case. Given the shocking year directly in our rearview mirrors, this should not come as too big of a surprise.
What if someone had warned you on New Year's Eve 2020 that there was a virus spreading across the globe that would shutter businesses and cripple economies? What would you have done if you'd known there was trouble on the horizon? You would likely have looked to see how much cash you had in reserves, and if there weren't enough, you would have saved more.
Perhaps the fact that so few of us considered a global pandemic a realistic concern has left us shaken and helps explain why so many feel compelled to hoard extra funds when they come our way.
Chipping away at debt
Approximately 33.7% of us are using our direct stimulus payments to pay down debt. It's not fun or exciting, but we feel better knowing that we did something responsible with the funds.
Another thing that should not come as a surprise is the number of Americans who were forced into debt. Consider how quickly it all went down:
- Jan. 21, 2020: Officials recognized the first case of COVID-19 on U.S. soil.
- Feb. 10, 2020: President Donald Trump promised a crowd gathered for a political rally in New Hampshire that the virus would "miraculously" go away by April.
- Mid-April, 2020: The Labor Department reported that more than 22 million Americans had lost their jobs due to COVID-19.
For those who found themselves unemployed, it may have been personal loans and credit cards that allowed them to keep food on the table. Today, it appears that many (at least 33.7%) are committed to using stimulus funds to chip away at that debt.
Interestingly, the Fed study found that 37% of respondents without college degrees planned to use their stimulus check to pay down debt, while only 27% of respondents with a college degree intended to do the same.
Find yourself wondering about that new trampoline in your neighbor's yard? They could be among the 24.7% of Americans spending their stimulus checks on non essentials. For those Americans in the enviable position of having bills paid and enough in savings, non-essential purchases can be a mood-lifter after a year of bad news.
Still, the Federal Reserve study showed that only 8% are buying non-essential items -- which makes your neighbors pretty unique.
As of today, more than 25% of all American adults have been fully vaccinated against COVID-19, a fact that one might imagine would change the way we use stimulus funds. According to researchers, though, the percentage of Americans who saved, paid down debt, and spent their stimulus checks has changed very little from check to check.
Researchers don't seem worried. In fact, they believe that the sudden increase in savings will eventually fuel spending. As uncertainty diminishes, more people are vaccinated, and businesses fully open, the savings dam will break, and consumers will begin to feel confident about parting ways with their money.
As we wait for our world to "normalize" feel free to visit our coronavirus hardship loan page to learn if a hardship loan could be right for you.
Alert: our top-rated cash back card now has 0% intro APR until 2025
This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes.
Our Research Expert
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2024 The Ascent. All rights reserved.