by Maurie Backman | Oct. 6, 2020
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Data reveals that some Americans used that money to better themselves financially.
The initial round of stimulus payments that went out earlier this year provided much-needed relief for Americans across the board. Back in spring, unemployment was raging, stay-at-home orders were widespread, and a lot of people were feeling extremely financially insecure. For some, those stimulus checks served as a true lifeline.
In fact, 16% of those who received a stimulus payment spent the money on food, health and beauty aids, and household products, reports the National Bureau of Economic Research. But here's some positive news: A good 27% of Americans were able to bank their stimulus checks, which means they put themselves in a stronger financial position to make it through the pandemic.
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These days, a lot of people are out of work and dealing with income loss -- and unfortunately, it could be a while before their circumstances improve. One of the terrible things about the pandemic is it's spurred a recession unlike any other. As such, those who are jobless right now could stay that way until well into 2021.
That's why it's crucial to have emergency savings. If you lose your job in the coming months, it could take more time than usual to find work. And while unemployment benefits will replace part of your paycheck, they may not replace it in full. Money in the bank gives you a way to supplement your income until your financial situation improves. That's why it's encouraging to see so many Americans used their stimulus money smartly -- for savings purposes.
If you've already spent the stimulus money you received earlier this year but you're still eager to boost your savings, you do have options, assuming you're still employed. First, take a close look at your budget and identify money you could bank. If you normally spend $150 a month commuting to work and you're currently doing your job entirely remotely, that $150 could go straight to your savings account. Similarly, if you generally go out once a week and spend $30 on a night out, put that money into savings instead.
Now to be fair, you may also be spending more than normal on certain expenses. The cost of groceries, for example, has risen tremendously since the start of the pandemic, so you may find food costs an extra $50 a month. But ideally, you'll still find a way to eke out a modest amount of savings thanks to the lifestyle changes the pandemic has forced you to make. That's where you have a real opportunity to buy yourself some financial protection.
How much should you aim to save? A general rule of thumb is to try to save up enough to cover at least three months of bills -- and ideally, more like six months' worth. If you're starting with very little money in the bank, it could take a while to reach either goal, but don't give up.
It's too soon to know if Americans will be in line for a second stimulus check. But if a follow-up round of payments does come through and you don't need it to cover expenses, do yourself a favor and put that money directly into the bank. It's not every day that a windfall like that lands in your lap. If lawmakers do manage to come to terms on a relief deal that includes a stimulus check, you'd be wise to take advantage of it.
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