Urban News Staff Reports
With millions of taxpayers slated to receive relief checks in the coming weeks, many are making plans for how to spend the unexpected windfall due to the coronavirus pandemic and the government relief package.
A new survey from MagnifyMoney of more than 1,000 Americans reveals that for most, the relief check is a necessity. Nearly half of survey respondents said they plan to use the money on essentials like groceries and bills, underscoring the current fragile state of Americans’ finances.
How Consumers Will Spend Stimulus Checks:
- Groceries: 44.5%
- Pay Bills: 42.6%
- Pay Rent/Mortgage: 28.5%
- Put Some in Savings: 26.0%
- Put All in Savings: 17.6%
- Pay Credit Card Debt: 15.2%
- Pay Off Other Debt: 7.0%
- Unsure: 6.2%
- Donate Some to Charity: 4.3%
- Splurge: 4.0%
- Pay Off Student Debt: 3.6%
- Donate all to Charity: 2.3%
- Post-Pandemic Vacation: 2.2%
The survey also revealed that households with lower incomes were, for the most part, more likely to use their relief checks to pay for necessities, such as groceries, bills or housing costs. Meanwhile, we found that 7% of households that make $100,000 or more annually plan to donate their entire relief check to charity or someone in need.
Stimulus Check as a Necessity
Overall, our survey revealed that the relief checks are much needed, with 69% of survey respondents saying that they personally need the financial assistance. That’s in comparison to 26% of respondents who said that they don’t really need the check but that it will help and just 6% who say they don’t need it at all.
Across all generations, the overwhelming majority of respondents said they indeed needed the relief payment. However, Gen Zers were far more likely to say that they didn’t need the relief check (10%) compared to millennials, Gen X and baby boomers. One possible explanation for this could be that Gen Zers could have parents or other older adults supporting them financially. Not surprisingly, our survey also found that households with less than $25,000 in annual income were far more likely to say they needed the relief check (80%), compared to 50% of households that make $100,000 or more.
What Consumers Should do with Stimulus Check
Matt Schulz, the chief credit analyst for LendingTree, acknowledges there is no one-size-fits-all answer when it comes to how people should use their stimulus checks, but says it’s important to carefully plan what you do with it.
“If you can put some of the check away to start an emergency fund or build up your current one, that’s probably ideal,” Schulz said. “That’s not reality for millions of Americans, though. For many, this will be about keeping the lights on or putting food on the table. That’s why these checks are so, so important.”
If you’re focused on using your check to demolish debt, Schulz emphasizes the importance of having an emergency fund in place as well. “It’s obviously great to pay down debt, but far too often, people pay off debt and have no savings at all,” Schulz said. “That means that if an unexpected expense comes up, that cost goes right back on the credit card and the person is right back in debt. Having even a little bit of cash in savings can help avoid that situation.”
If you’re on good financial footing, Schulz points out a few smart ways to use that money, including:
- Growing your rainy-day fund
- Paying off credit card debt
- Bulking up your retirement savings
- Supporting your community by spending on small businesses or nonprofits