Last week, the IRS, the U.S. Department of the Treasury, and the Bureau of the Fiscal Service announced they sent more than 2.2 million additional Economic Impact Payments under the American Rescue Plan. What have almost half of the people who received the money this year done with it?
Since Joe Biden enacted the ARP Act in March, the third stimulus check has already been awarded to millions of families to help them overcome the crisis caused by the coronavirus. What have they spent the money on?
Thanks to a new report by Claudia Sahm, principal investigator at the Jain Family Institute and former economist at the Federal Reserve, we know that many of these people used the money to pay off debts.
Sahm said that paying off their debts makes citizens feel more financially secure and helps them lower interest payments in the future.
“My research report contends, contrary to several prominent critics, that stimulus checks, including the most recent payments of $ 1,400 under the American Rescue Plan, provided much-needed relief to millions of families and helped boost the economy in a critical moment of recovery, ”Sahm wrote in his report, according to Business Insider.
The report pointed out that the checks gave financial help to people who previously did not have extra money, and this allowed them to pay for whatever they needed.
To find out how people were using the third round of stimulus checks, the University of Michigan asked more than 1,000 survey participants if they would use the money primarily to increase spending or savings, or primarily to pay off debt.
According to responses, 45% of families used the $ 1,400 stimulus check to pay off debt and 31% said they would use it primarily to increase savings.
Therefore, most people chose to use this additional money to help them become more financially stable rather than increase their expenses.
Likewise, families negatively affected by the pandemic to a greater extent used the stimulus check to pay their debts.
While the most financially vulnerable citizens primarily used the latest round of stimulus checks to pay bills and save money for the future, the high-income individuals who received these checks chose to spend them, which helped drive demand for goods and services in the middle of the economic crisis.