70% of Stimulus Cash Is Stuck in Checking Accounts – What’s the Smartest Thing to Do With Yours?
In post-pandemic America, consumer spending is way up. According to a CNN interview with Bank of America’s CEO Brian Moynihan, spending is over $1 trillion for 2021, an increase of approximately 20% over 2019 levels. Yet Moynihan has seen massive amounts of cash sitting around in American checking accounts, stating that Americans “have not spent about 65 [to] 70% of the last couple of rounds of stimulus.”
Yes, instead of buying masks or jigsaw puzzles, many Americans have started moving on to higher-ticket, post-pandemic purchases like fun clothes and plane tickets. But many families are attempting to keep their money safe to pay for necessities as they wait for the recovery to reach them. Unemployment remains higher than it was before the pandemic, and eviction moratoriums expire soon. Other families are just trying to figure out what to do.
If your family is one of them, there are many ways to use that extra cash – and there’s no one-size-fits-all approach. But the answer is almost never to let cash sit trapped in a checking account, unless you’ve got one with high interest rates.
Some experts like Suze Orman think tucking away that money is smarter than saving or investing it, as long as it’s in a strategic way. If you’re trying to decide whether you should pay your bills, start an emergency fund, invest for the first time, or simply splurge now while you’ve got a chance, GOBankingRates has presented a targeted breakdown of the best approach for your personal circumstances here, helping you weigh current investments against debt, retirement goals and more.
The availability of these funds will continue to fuel economic growth, but there is the risk that the increased demand relative to the supply of goods will lead to inflation. In addition, tight supply chains often lead to shortages when demand shifts. In 2020, there was a toilet paper shortage. In 2021, we have a shortage of microchips.
In theory, long as people have money to spend, economic growth will follow. The remaining stimulus balances will help sustain growth as the broader economy recovers.
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