Americans Made Responsible Choices With Their Stimulus Checks -- and They Need Another One
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The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provided direct payments to millions of Americans at the start of the crisis. Many people used their money responsibly to shore up their finances and cover basic necessities.
In fact, according to the National Bureau of Economic Research, households have already made good use of their stimulus funds. But for most households, the money is largely gone. Unemployment remains near record highs and coronavirus cases continue to spike, meaning Americans are in desperate need of more stimulus money.
Americans did the right thing with their COVID-19 money
According to the National Bureau of Economic Research, most U.S. households spent 40% of their stimulus checks. The majority of this money went to cover necessities including food, health and beauty aids, household products, healthcare, and durable goods. Another 30% of the money was used for debt payment, while 30% was saved.
By reducing their debt burden and adding money to their savings, Americans set themselves up for more financial security in the future.
Paying down debt can reduce interest costs and make it possible to become debt-free sooner. This frees up cash for other goals. And if you lose your job or face another hardship, less debt means you have lower monthly obligations. Having money saved for a rainy day makes it easier to avoid borrowing when unexpected expenses crop up.
Even the type of spending shows most Americans were very responsible with the funds they received to help them through the pandemic. Many used it for essentials such as healthcare, food, and durable goods. For those who lost jobs or experienced a reduction in hours, this money may have made the difference between affording groceries and borrowing for the basics.
Unfortunately, the data shows the bulk of Americans have already used most of their stimulus money. So most families likely have little left to see them through continued economic chaos. And with the country still in a recession and serious concerns about a potential spike in COVID cases as the weather gets colder, this leaves them in a very precarious position.
Sadly, even those who saved their payments may not have enough emergency funds to see them through if times get tough. Many American families had too little emergency savings at the start of the pandemic. A single payment of $1,200 per adult and $500 per dependent child isn't enough to change that -- especially since only around 30% of the money typically went into people's bank accounts.
The ways that Americans used the money show exactly why the government should take action to provide the help people need. Negotiations on another stimulus bill have been ongoing for months, lawmakers have thus far been unable to pass another stimulus bill. Warnings from economists and business leaders that this failure could derail this fragile economic recovery have not been enough to drive through a deal.
The bottom line is, Americans made responsible choices with their COVID-19 money, and lawmakers now need to make the responsible choice to provide them with more of it.
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