With stock markets reeling from the coronavirus outbreak and amid concerns about the health of the U.S. economy, the federal government has approved a plan to start delivering cash payments to taxpayers.
On Friday, President Trump signed into a law a bill providing about $2 trillion in aid to businesses and households, including direct cash payments to households.
Under the legislation, individuals will receive stimulus checks of up to $1,200 per adult or $2,400 for married couples, and $500 per child, depending on income details from their 2018 tax return, or your 2019 tax return if you've already filed it. Payments would drop off for higher earners and would phase out completely for individuals earning more than $99,000 or couples earning more than $198,000.
Government officials hope that a direct injection of cash — along with other measures like a proposed moratorium on evictions, temporarily waiving interest payments on student loans, and expanding access to paid sick leave — will help bolster the economy while testing ramps up and work continues on a vaccine.
The idea is that getting money into the hands of consumers will lead to an increase in demand for goods and services, and spending.
Video by Jason Armesto
This isn't the first time the government has sent out stimulus checks.
"We've seen things like this in the past," says Lukas Smart, senior portfolio manager at Dimensional Fund Advisors. "The last time was 2008," when the Bush administration used a stimulus package to try and head off the impending financial crisis. At that time, stimulus checks offered between $300 and $1,200 per household, depending on the number of tax filers.
You should expect to see your first stimulus check in a few weeks. Again, what you receive will be determined your income and household size.
If you're short on cash, you could use the money to pay rent, buy groceries, or cover other bills. You could also use it to beef up, or start, an emergency fund. Only 41% of Americans have $1,000 put away for an emergency, so if you can afford to save the money now, it could help get you started. Experts advise you stash away around six months' worth of expenses.
"The majority of people should probably keep it in their checking account or savings account temporarily," financial advisor Winnie Sun, founder of California-based Sun Group Wealth Partners, recently told CNBC.
It can also be a good time to rework your budget to make sure you're making sound financial decisions. There's "no better time to begin your new financial plan and cash management than with [that] check," says Jedidiah Collins, a certified financial planner based in the Seattle area.
If you aren't near retirement and have an emergency fund that can tide you over for a while, it may be a good idea to look at investing the money. The market is down, which effectively means that investments are on sale — and when the market recovers, as it always has, you could stand to benefit.
"If you're looking to invest," says Collins, "you have just traveled back in time four years."
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