Spending

Here's how Americans meant to use their first 2 stimulus checks — and how they actually used them

The top two categories were food and utilities.

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As batches of third stimulus checks from President Joe Biden's $1.9 trillion Covid relief package continue landing in bank accounts and mailboxes, recent data from the Census Bureau shows how Americans used the previous two rounds of stimulus money.

Surveys from last year indicated that many Americans intended to put their stimulus checks into savings. However, it turns out that most people didn't follow through with that plan. In fact, more than half of people spent the majority of their stimulus checks to pay off debt, and another quarter used the bulk of the money to pay for routine expenses, according to the Census Bureau.

The data contradicts a common narrative that putting cash in people's pockets didn't work because the money got stored away instead of being spent and helping boost the economy. In actuality, though, only 20% of people saved most of their stimulus.

When the bureau asked a more specific follow-up question that let respondents check multiple categories on which they spent their stimulus checks, the No. 1 response was on food, including groceries and dining out. More than 70% of Americans spent part of their first stimulus checks on food, and nearly 60% also spent some of their second checks on food.

Utilities came in second place for both rounds of stimulus checks: More than half of Americans spent some of the money from the first installment to cover utility bills, and about 45% did so with the second.

The U.S. economy is 'on the verge of something big'

It wasn't cheap to send Americans stimulus checks, but the government gambled that the expense would be worth it because it would prompt people to spend, and that would juice the economy. The first round of checks alone cost the federal government some $290 billion. The most recent round had an estimated cost of $465 billion. The big question was, would people mostly use the money to buy goods and services and blunt some of the fallout from the pandemic-induced recession? Or would they save it for a rainier day, which would limit how much these payments would boost the economy?

The Census data shows that most people used that money, which is what the government hoped for.

However, plenty of people also increased their savings: Some 28.8 million Americans saved or invested at least some of their stimulus check, according to Census data. The personal savings rate — the portion of your disposable income that you sock away — spiked to levels not seen in decades in April 2020 and January 2021.

"Total credit card debt is 12% lower now than it was a year ago; the personal savings rate is way up," explains Ted Rossman, an industry analyst at CreditCards.com. "A lot of people are using things like stimulus and tax refunds to either boost their savings or pay down debt."

While Americans are using the cash from the federal government to "shore up the household balance sheets," consumer spending jumped nearly three percentage points in January, Rossman points out. That shows that the stimulus did more than just pad savings accounts: It paid bills and prompted people to go shopping, too.

The data from the Census Bureau gives a glimpse into what kind of discretionary spending people did with their stimulus checks. When the agency let respondents pick multiple categories to describe their stimulus use, paying debt and saving came in seventh and ninth place, respectively, well behind spending on food, utilities, and personal and household products.

As the weather gets warmer and more Americans get vaccinated, more of them are likely to open their wallets after a year of limited spending.

"I think that we're definitely on the verge of something big in terms of a rebound," Rossman says. As more people receive Covid vaccinations and feel more comfortable venturing out, "there's got to be some element of blowing off steam and unleashing some of this pent-up demand."

That said, no one wants Americans to overspend and put themselves back in the red. "It would also be good if credit card debt didn't go back as high as it used to be" before the pandemic, Rossman says.

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