Millions of hard-hit Americans are starting to cash in on their second coronavirus stimulus check, but a new Bankrate survey finds that the money won’t keep them going for long.
Highlighting the pandemic’s ongoing financial toll almost a year into the crisis, the majority of participants (53 percent) say the $600 check they’re expecting to receive for every adult and dependent child in their household will sustain their financial well-being for less than a month. That total includes 18 percent who do not think the money is enough to make any impact on their finances.
Meanwhile, 71 percent of those receiving stimulus payments say the money will be very important or somewhat important to their near-term financial situation.
Bankrate’s survey highlights the economy that President-elect Joe Biden will inherit Wednesday, when he officially takes office at a time when joblessness is at its highest since the Great Recession due largely to the pandemic. Biden announced a $1.9 trillion economic rescue plan on Jan. 14 to increase Americans’ stimulus payments by an extra $1,400 and extend jobless programs until at least September. But the legislative process is bound to take some time, and the clock is ticking as unemployment edges higher and coronavirus caseloads again soar, forcing many businesses and restaurants to shutter.
“Ten months into the pandemic, and more than 70 percent of those receiving stimulus payments say it is somewhat or very important to their near-term financial situation,” says Greg McBride, CFA, Bankrate chief financial analyst. “Americans receiving stimulus payments overwhelmingly say this money is needed just to keep up or to batten down the hatches.”
- While more than half of Americans say their $600 (or more) stimulus check will sustain them for less than a month, about 16 percent say the funds will last between one month and less than three months.
- Most Americans (42 percent) are expecting to put their funds toward bills.
- Nearly 4 in 10 Americans (44 percent) say relief funds will be very important to their financial well-being, while 27 percent say checks will be somewhat important.
- Women, lower earners, minorities and Americans without a four-year college degree are more likely to consider the funds very important to their financial situation.
How long will the stimulus money last? More than half (53 percent) say not even a month
For adults receiving a $600 Economic Impact Payment, the most common expectation for how long the money will last is less than one month (53 percent), including 18 percent that said it wouldn’t keep them going at all. Another 16 percent said the payment would last them between one month and less than three months.
A modest number of Americans see their funds lasting longer than that. Just 5 percent say it will help for three months to less than five months, while 10 percent think it will support them for at least five months. Another 12 percent said they aren’t sure how long those funds will last, and 5 percent preferred not to specify.
Americans are considerably less optimistic about how long their second stimulus check will last compared with the first round of relief payments. In an April iteration of Bankrate’s stimulus poll, just 31 percent of respondents said the payments would last less than a month.
A big part of that worsening outlook: Stimulus payments were cut in half. The CARES Act sent $1,200 checks to most middle-income U.S. adults, compared with the $600 second stimulus checks. At the same time, reduced checks went out to fewer Americans, with individuals earning $87,000 or more a year (or married couples earning $174,000 or above annually) excluded. With the CARES Act in March, those cutoffs for individuals and married couples were $99,000 and $198,000, respectively.
Yet, funds sent to families with dependent children were bolstered to $600 in the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, up from $500 in the CARES Act. And with the economy still struggling under the weight of the pandemic, more dire financial circumstances could still be part of the picture.
More than 18 million Americans are claiming some type of jobless benefit as of Dec. 26, according to the Department of Labor, though that number could be substantially higher amid ongoing delays, technological issues and a brief lapse in benefits that began on Dec. 25. The economy has recovered slightly more than half of all pandemic-related job losses, about 4 million workers have dropped out of the labor force since the crisis began, and long-term unemployment has more than tripled since the start of the pandemic.
What Americans plan to do with their stimulus checks
Of the Americans who are planning to spend their stimulus checks, most (42 percent) say they’re going to put it toward monthly bills, such as their rent, mortgage or utilities. More than a quarter of respondents (25 percent) want to use the funds to pay down debt, and nearly a third (32 percent) are going to allot it toward their day-to-day essentials. Few Americans (8 percent) say they’re going to use their stimulus check to cover discretionary purchases, from dining out and shopping to taking a vacation.
Other Americans (6 percent) say they are inclined to invest it, while 30 percent plan to park the cash in their savings. A marginal 5 percent don’t know what they’ll do with the money, while 8 percent selected “other.”
“Paying monthly bills, using for day-to-day essentials, putting in savings and paying down debt were the most commonly cited intentions,” McBride says. “Just 1-in-12 indicate they’ll use any of this money for non-essential spending.”
Americans’ plans for their stimulus check depend on how much money they make. An overwhelming majority of those earning under $30,000 annually (49 percent) say they’re going to put the funds toward monthly bills, while Americans making $80,000 and over a year were most likely to say they’re going to put their check toward their savings (39 percent). Those higher-income earners were also more than two times as likely to put the funds toward discretionary spending than their lower-income counterparts (at 16 percent versus 6 percent, respectively).
Men were more than three times as likely to say they plan to invest their funds compared to women (9 percent versus 3 percent). On the flip side, women are more likely than men to use their payments for bills (45 percent versus 38 percent) or day-to-day essentials (37 percent versus 27 percent).
Age is also a contributing factor. Millennials are more than three times as likely than Generation X and baby boomers to use at least some of their stimulus check for discretionary spending, at 16 percent compared with 5 percent of both Gen Xers and baby boomers.
The importance of relief funds to Americans’ financial well-being
Bankrate’s survey findings suggest that a lot of thought might go into what Americans ultimately decide to do with their stimulus money. Most Americans (44 percent) say those funds will be very important to their financial wellbeing, while another 27 percent believe the checks will be somewhat important.
About 1 in 7 (15 percent) believe it to be not very important, 10 percent see it as not at all important and 4 percent don’t know.
Women, lower earners and Americans without a four-year degree more likely to see their stimulus funds as very important
The coronavirus pandemic has touched nearly all facets of American life, but not everyone has shared the same experience.
The workers who were already better off were most equipped to weather the storm. Publicly traded companies had access to no-strings-attached aid when they tapped into booming capital markets. The small mom-and-pop restaurants depended on a crucial yet flawed rollout of Small Business Administration (SBA) grants with strict provisions on how to use the cash.
White-collar workers largely got to keep their jobs as the rest of the country shut down, with their positions often not requiring close contact with other people. The predominantly lower-paid, service-sector workers, however, saw their employers’ revenues plummet as consumers started hunkering down in their homes. That led to swift layoffs among workers who were largely women and minorities, if nationwide stay-at-home orders meant to slow the contagion’s spread hadn’t displaced them already.
A Federal Reserve survey from May found that nearly 40 percent of all pandemic-related job losses were concentrated among those who earned less than $40,000 a year.
A separate Bankrate survey from August 2020 found that nearly 3 in 5 Americans say remote learning will negatively impact their finances for reasons that include having to quit a job, cut back on hours or altogether limit an individual’s career prospects as parents attempt to school their children at home. That’s a job more likely to have fallen on women, according to a September 2020 research report from Pew Charitable Trusts.
Underscoring the sharp divide between the haves and the have-nots, Bankrate’s survey found that those more likely to consider the money very important include women (50 percent compared with 39 percent of men), lower earners (57 percent earning $49,999 or less versus 32 percent making more than that) and those without a four-year college degree (51 percent as opposed to 30 percent with at least a four-year degree).
Black and Hispanic Americans (56 percent and 51 percent) were also disproportionately more likely than white respondents (40 percent) to say the money will be very important.
Recession-proofing your finances
The U.S. economy suffered from its worst upheaval in generations, with unemployment rising to the double digits and eclipsing even that of the Great Recession of 2007-2009.
The federal government moved at a historically breakneck pace to help backstop Americans’ finances during the turmoil, but Americans have still encountered roadblocks. Some consumers didn’t see their jobless benefits until months down the road; others never received their first stimulus check and will likely have to claim it on their 2020 tax returns.
In the nine months that passed between the CARES Act and the $900 billion supplemental relief bill, several key relief programs expired, including the $600 weekly boost to jobless benefits and two supplemental jobless programs.
Even before the pandemic, Americans were living paycheck to paycheck.
All of that illustrates the importance of recession-proofing your finances no matter the economic cycle, cutting back on expenses as much as one can and finding creative ways to still make a living even during the toughest of job markets. When it comes to saving for a rainy day, no amount is too small to set aside, especially as just 4 in 10 Americans report in a separate January Bankrate survey that they could cover a $1,000 emergency expense.
More stimulus checks could soon be on the way, if Biden’s relief plan comes to fruition, though all of that will still likely take some time.
“It’s not hard to see that we are in the middle of a once-in-several generation economic crisis within a once-in-several generation public health crisis,” Biden said in a Thursday address. “And there is no time to wait. We have to act and act now.”
Bankrate.com commissioned YouGov Plc to conduct the survey. All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 1,203 adults, including 838 who have received/anticipate receiving a stimulus check. Fieldwork was undertaken January 5 – 6, 2021. The survey was carried out online and meets rigorous quality standards. It employed a non-probability-based sample using both quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results.