Stimulus checks still boost the economy, even if the money goes into savings or bill paying, experts say.
Lawmakers are considering capping eligibility requirements for direct payments of up to $1,400 for low and middle-income families as part of the $1.9 trillion COVID-19 relief bill.
The National Bureau of Economic Research recently looked at what people did with the $1,200 per person stimulus payments disbursed last April, NBC News reported.
It discovered that just 15% of recipients spent most of it. About 33% said they saved it. The rest said the money went to pay off debt.
“This is the short view versus the long view,” said Greg McBride, chief financial analyst at Bankrate. "In the short term, stimulus money put in savings or used to pay down debt may not give an immediate boost to the economy, but households that have more savings and less debt are in a better position to spend on a consistent basis going forward.”
NBC News noted that Bankrate data shows 60% of Americans could pay for a $1,000 emergency expense wholly using their existing savings. Many of those hit with an emergency expenditure would be forced to borrow, and the costs of servicing that debt would detract from other future spending, McBride said.
“Even among people who don’t have immediate plans to spend that money, that doesn’t mean it’s not going to get spent,” he said. “That’s what’s there to absorb the next time an unplanned expense arises. That’s a better bet for households than incurring high-interest debt.”
The White House is reportedly open to reducing the maximum income earned but keeping the payments at $1,400 per person.
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