How Most People Spent Their Stimulus Checks


The third round of stimulus checks went out to eligible Americans beginning on March 12 in the amount of $1,400. As the year comes to a close, we’re looking back on how most of us spent the money we’ve thus far received as part of the government’s response to the coronavirus pandemic, which has decimated entire industries and plunged millions into poverty. 

For most Americans, the first round of funds (largely issued in April of last year, when the unemployment rate soared as high as 14.7%) went straight to covering basics. According to the U.S. Census Bureau’s survey fielded in July 2020, those earning between $75,000 and $99,999 annually were more likely to use their stimulus payments to pay off debt or to contribute to their savings; 87.6% of people making $25,000 opted to use their stimulus payments to meet expenses. We saw similar trends with the following stimulus payments issued.  

Julie Ramhold, consumer analyst at DealNews, found that indeed, stimulus payments went not toward splurges, but toward making ends meet and building up a nest egg. Here’s a look at some of the categories we spent on.

Groceries, Rent and Bills

“Not surprisingly, stimulus checks went a long way towards helping some consumers pay their bills or buy groceries,” Ramhold said. “For many Americans, once the pandemic hit, they were furloughed at their jobs or straight up just laid off so these checks helped them get by until they could find another long-term solution.”

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Paying Down Debt

“Other consumers used their stimulus checks to try to pay down debt, especially if they were in a financially stable situation and still held onto their jobs,” Ramhold said. “The money was an unexpected bonus so it’s not too surprising that consumers who are saddled with debt from credit cards, student loans, and other things jumped at the opportunity to pay that down. Even if they’re regularly paying on the debt, having a sudden influx of cash they weren’t counting on provided a good chance to put more towards it, which should result in them being able to pay it off sooner.”

Boosting Savings

“Other consumers took that unexpected check and put it towards boosting their savings, especially when it came to the second and third checks,” Ramhold said. “By then they may have found a more stable situation and could use the funds for other things besides paying for monthly bills or household necessities, so many put it into savings. And if those same consumers had to dip into their savings earlier due to the pandemic, then this offered a chance for them to return it to pre-pandemic levels — or at least get close to replenishing it.”

Some Experts Think Americans Will Just Spend More Money 

Despite evidence that Americans were responsible with their stimulus checks — generally spending them on needs versus wants, and/or pocketing the cash in a savings account — there’s been concern among financial minds that stimulus payments can foster poor financial habits. 

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“What I worry about is similar to the wealth effect, which is an economic term that’s shown that when home prices and stock prices rise, people spend more money,” said R.J. Weiss, a CFP® and founder of the personal finance site The Ways to Wealth. “Yes, their perceived wealth has increased, but most households’ month-to-month cash flow situation isn’t impacted by the rise of real estate or stocks. Yet, they spend as if they’re bringing in more money.”

Weiss envisions a similar phenomenon happening with the stimulus payments. 

“Bad financial habits can develop, such as spending more impulsively, and while short-term they wouldn’t notice their impact, long-term they may find themselves in worse trouble,” Weiss said.  

It’s All About Budgeting for ‘Windfalls’ 

Jeff Galak, associate professor of marketing at Carnegie Mellon University’s Tepper School of Business, qualifies stimulus funds as “windfalls,” as in, they are not part of a typical income plan like a monthly salary check. 

“Because of this, they are often mentally budgeted very differently,” Galak told GOBankingRates. “Whereas you might have a good plan about how to spend your monthly paycheck (rent, utilities, groceries, etc…), there isn’t typically a plan for windfalls like stimulus funds, and because there isn’t a plan, these windfalls are often mentally budgeted into less utilitarian budgets.

“They often get spent on things like new TVs (that might not be immediately needed), new clothing, or really anything that is more for pleasure than for something that is really a must-have,” Galak continued. “And, to be clear, so long as those fundamental needs are met, there’s absolutely nothing wrong with spending a stimulus check on something fun. The trouble creeps in when there is a need that isn’t first addressed, like high interest credit card debt, student loan payments or back rent.”

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Though true that windfall money can be easily misspent or spent on enjoyables versus essentials, that doesn’t seem to be what has happened with the stimulus monies Americans have received thus far — at least, not when looking at it in a big picture sense. Most of us used the money to get by, pay down debt and secure savings. For a while, there were talks about a fourth stimulus check and it seems likely we’d do the same with another one considering that, as the pandemic rages on, we’ve yet to land in a place of economic security and peace of mind.  

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