How Stimulus Checks Changed Americans’ Ability to Pay in Emergencies


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Many Americans were under financial pressure even before the start of the Covid-19 pandemic.

In 2019, 41% of households aged 25 to 64 said they had not saved enough to cover an unexpected expense of $ 400, according to data from the Federal Reserve.

One of the reasons they may have struggled to put money aside is lingering credit card debt.

Then the pandemic turned the financial situation of many Americans upside down.

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The unexpected upheaval prompted the U.S. government to send an unprecedented amount of direct cash payments to millions of Americans.

Boston College’s Center for Retirement Research investigated whether these cash injections helped improve Americans’ financial situation.

The answer: Stimulus checks have served as a lifeline for those in need. But it remains to be seen whether these cash reserves will hold up.

Congress authorized the first stimulus checks of $ 1,200 per person in March 2020. Subsequent payments of up to $ 600 and $ 1,400 followed in December and March, respectively.

In total, individuals could have received up to $ 3,200 and married couples up to $ 6,400. In addition, there was up to $ 2,500 available per eligible dependent. Although the eligibility rules varied depending on the payment, whether or not people had a job at the time was generally not a criterion.

And it appears that employment was indeed a factor in whether those checks altered a household’s ability to cover an expense of $ 400. For people who kept their jobs, those who still struggled to manage a $ 400 expense fell to about a third and stayed there throughout 2020.

For those who have lost their jobs, however, it has fluctuated. In April 2020, around 51% reportedly struggled to cover an expense of $ 400, which fell to 36% in June 2020 due to direct payments. This rate rose again from November 2020, when 55% of those who were unemployed again reportedly struggled with a $ 400 emergency as the extra $ 600 per week in federal unemployment benefits ran out and Congress was deadlocked on more stimulus. .

The way households used the money also varied depending on employment status. Unsurprisingly, those who kept their jobs were able to pay off their debts and save.

For those who lost their jobs, the first stimulus checks of $ 1,200 were mostly spent. However, the second and third payments were mostly spent on savings, at 60% and 51%, respectively, with recipients using the majority of the second and third stimulus checks of $ 600 and $ 1,400 to put money in. next to.

“The question is how long will these favorable developments in the balance sheet last,” said the report from the Center for Retirement Research.

Controlling high-interest credit card debt, which kept people from putting money aside before the pandemic, could help. Notably, reducing debt was a priority for many Americans – both unemployed and employed – for the second and third stimulus checks.

However, the latest data from the Federal Reserve shows household debt is on the rise, with credit card debt rising $ 17 billion in the second quarter. Despite the increase, credit card balances were still $ 140 billion lower than they were at the end of 2019.

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