What Should You Do with Your COVID-19 Stimulus Check?

What Should You Do with Your COVID-19 Stimulus Check?

Jacqui Kearns, Chief Brand Officer

As the COVID-19 crisis continues to unfold (and worsen), some financial relief is on the way from the U.S. government. In addition to boosting and expanding unemployment insurance and extending aid to businesses and frontline health care workers, the relief bill1 passed by Congress and signed by the president on March 27 will provide a $1,200 COVID-19 stimulus check for many individuals, subject to an income threshold. This will be welcomed by many families struggling during this time, and hopefully you’ve also recently benefitted – or will benefit from – a tax refund, since we’re also in the midst of tax season (which has now been extended to July). But with all the economic uncertainty, you may be wondering exactly what you should do with your relief and/or tax refund money. The answer to that question depends on how the crisis has impacted you and on your overall financial wellbeing, which we define as how secure and independent you feel about your finances.


Person holding pen

When should you spend your COVID-19 stimulus check?
If you’re currently in a precarious financial situation – such as having been laid off from your job due to the COVID-19 crisis, or having had your hours cut back – you may have no choice but to spend your stimulus check or tax refund on essentials like food, rent or medical care. Though calling the aid “stimulus” implies that the government wants you to use it for consumer spending, the reality is that for many families whose finances are a bit unsteady, this will be a lifeline rather than a boost. That said, if you currently have plenty of savings and a steady income, you may want to do your part to stimulate the economy by spending your check on non-essentials, like ordering out for food to support local business, online retail or new subscriptions to streaming services to keep yourself entertained during the ongoing lockdown. Alternatively, you can think about donating the money to a worthy cause.

When should you save it?
If you fall more into the middle of the wellbeing spectrum – for instance, you’re still working but you don’t have a high income or more than a few months’ worth of savings – you probably shouldn’t spend your government money, if possible. Rather, now is a good time to build up your savings, considering that the pandemic “social distancing” policies could last for months,2 and that even afterward a recession is expected,3 meaning that even if you haven’t yet been impacted, there’s a possibility your income may suffer in the long term. Affinity offers a new savings account called SmartStart that inverts the traditional model of earning interest; rather than having a minimum deposit before interest begins to accrue, interest starts accumulating right away at a relatively high 2% rate until you save $2,500, at which point your interest rate begins to move back down to the standard rate. The SmartStart account, which has no minimum balance or opening deposit, is a great way for people who don’t have much money set aside to get started while making some additional money off interest – and now is a smart time to start.

When should you invest it?
As with spending stimulus money or tax refunds on non-essential items, investment is something you should do if you are feeling financially steady and likely to remain so. Since this crisis may last longer than anyone would hope, you’ll want to make sure you have plenty of liquid assets – i.e., you can access your money when you have to. Investing money is generally a good idea, but make sure you can afford to not have your cash readily available in your account before you do so. Also, if you’re new to investing and don’t know much about asset management, consult a reliable, certified expert. If you’re an Affinity member, you can speak with one of our financial advisors about different ways to invest your extra money and plan for your future. But again, if you’re worried about making ends meet, focus first on funding basic purchases or building up your emergency savings.

The COVID-19 pandemic is testing our resolve in never-before-seen ways, but Affinity is working hard to help maintain our members’ financial wellbeing and provide valuable financial insights. As the situation evolves, there may be more government help coming for individuals, families and businesses, and we’ll be here to help you make sense of it all and make it work for you.

For additional information and updates from Affinity about COVID-19, please visit https://www.affinityfcu.com/banking/we're-here-for-you.aspx

                                                   

This information is for informational purposes only and is intended to provide general guidance and does not constitute legal, tax, or financial advice. Each person’s circumstances are different and may not apply to the specific information provided. You should seek the advice of a financial professional, tax consultant, and/or legal counsel to discuss your specific needs before making any financial or other commitments regarding the matters related to your condition are made.  

1 Retrieved from https://www.cnn.com/2020/03/27/politics/coronavirus-stimulus-house-vote/index.html

2 Retrieved from https://www.washingtonpost.com/health/2020/03/16/social-distancing-coronavirus/

3 Retrieved from https://www.cnn.com/2020/03/09/economy/global-recession-coronavirus/index.html