How Covid Stimulus Checks Are Affecting Family Finances
Is your family struggling financially? You are not alone. For so many Americans, the Covid-19 pandemic has put a huge strain on family finances. In an effort to provide some relief, stimulus checks have been dispersed to help families get back on their financial feet. Below are some ways these stimulus checks have had an impact on consumers’ wallets.
How Americans Are Spending Their Stimulus Check
If you are wondering how most Americans are spending their stimulus checks, it is not on some frivolous big purchase. Two thirds are using them for monthly bills and groceries. Now, these stimulus checks aren’t going to change anyone’s life overnight, but they can make a meaningful difference to your family finances, particularly if you invest the money or put it towards savings.
1. Credit Card Debt
With the average American carrying plenty of debt and only paying the minimum each month, balances are barely going down. If you were to take that $1,400 stimulus check and put it towards your credit card debt, your minimum payment due each month would go down. The key is to continue to make the original minimum monthly payment that you were before.
For example, with a 16% APR and a $5,000 credit card balance, you are looking at a minimum monthly payment of $150. By putting your stimulus check towards that balance, you lower the monthly payment to $108. If you continue to pay that original $150 per month, you will pay off that card 15 months sooner and save about $900 in interest. After the credit card is paid off, you will have that money to put towards your other financial goals. Just make sure not to close the card once it has been paid off. Keeping it open helps you maintain a good credit score.
2. Establish an Emergency Fund
When it comes to family finances, having an emergency fund in place can mean the difference between financial ruin and staying afloat. If you have any high interest debt paid off, put the stimulus checks towards an emergency fund. The goal is to save at least three to six months’ worth of monthly expenses. When that unexpected expense pops up, you will be so glad you did.
3. Invest the money
If you have a stocked emergency fund and your credit card debt is paid off, consider investing your stimulus check. Focusing on S&P 500 index funds will put your money into investments with the top 500 of the largest companies (think Apple and Amazon). Investing the money now will provide you with a nice chunk of change down the road. Remember, this is about the long term and investing now will help kickstart a lifelong investing habit.
4. Fund a home purchase
Are you dreaming of buying a home in the future? Using these stimulus checks to save for a down payment is a smart idea. No, the money is not going to get you into your dream home, but it is a great start to fulfilling that dream.
5. Contribute to a health savings account
If you are planning on a major medical expense coming your way, putting the stimulus money towards an HSA will help keep your family finances on track. With health insurance costs skyrocketing year after year, you will not be sorry you did.
You Can Protect Your Family’s’ Finances
So many Americans are going through tough times financially. With that being said, assessing your needs and making smart moves with your covid stimulus checks can really help keep your family finances in good standing. What are you planning on doing with your check?