The U.S. Government passed legislation in response to the coronavirus pandemic emergency that provided funds to most low-income and middle-class individuals and families. Individuals could receive up to $1,200, while married couples who file jointly got $2,400. Having children provided another $500 per child.
That means a family of six could qualify for up to $4,400. This amount is in addition to an extra $600 per week of unemployment benefits.
When the money first hit bank accounts, Americans started spending their money from these one-time cash payments on legal marijuana products, groceries, and gasoline. 9% of people took the money out from the ATM, while 5% said they bought video games.
If you want to spend your money in more effective ways, here are some ideas to consider.
Emergency Fund Accounts
Since COVID-19 creates an unpredictable economy, the best option for the stimulus check is to create an emergency fund. Putting the cash into a high-yield online savings account could give you enough money to cover utilities, rent, or a mortgage payment.
If you have an emergency fund in place, then take care of your debt next with the stimulus check. Credit card debt is a high-interest problem that can take several years to pay off if you only make the minimum payment. It gives you an immediate guaranteed return because then you still have room to make an emergency purchase if necessary. Pay down the account with the highest interest rate first.
Investing in equities as a long-term investor makes sense since they are down over 30% from their all-time highs. Instead of putting all of your eggs in one basket, put small amounts in each week, carefully evaluating market conditions to reduce the risk of losing the stimulus check.
Donate it to a Local Cause
If you are an essential worker or don’t have financial impacts from COVID-19, then it may be useful to donate your stimulus check to a local non-profit. Many families, especially those with hourly workers, saw their income disappear overnight. Rising demands at food banks and other essential services mean more money is going out. Contributing some or all of your check can help a lot of people.
The goal of each action is to create a long-term impact with positive implications. Whether you save, spend, or invest, do so in a way that puts you on secure financial ground.