Stimulus payments have been a pandemic lifeline for many Americans. For some young adults, they have presented an opportunity to build up savings or pay off debt.
Most adults who reported receiving the second stimulus check, issued around the new year, used them to pay household expenses including utilities and telecom payments, according to recent data from the U.S. Census.
Uses for the stimulus payments varied by age group. About 54% of people between the ages of 25 and 39 reported on the Census survey that they mostly used the stimulus money to pay off debt, and 26% said they mostly saved it during the Jan. 6-18 period. By comparison, about 57% of people between the ages of 40 to 54 said they mostly paid off debt, and 22% said they mostly saved it.
Some are torn about what to do with the $600, given the uncertainty around the economy, the pandemic and the possibility of more stimulus.
“If you can’t expect what’s going to happen in the next couple months you have no incentive to actually go spend it,” said Cameron Turner, 23 years old, who lives in Berkeley, Calif. While Ms. Turner has remained employed at her job in public relations, she decided to put the check into her rainy day savings account.
Typically, up to half of stimulus checks on average are spent by people, said Jonathan Parker, a professor at MIT Sloan School of Management who studied the use of economic impact payments in both the 2001 and 2008 recessions. Though it is too early to draw demographic distinctions in the use of the 2021 checks, he said this time around is definitely different.
“The ability to consume got shut down in a lot of dimensions. So there’s a bunch of people who used to go out to restaurants and entertainment and spend a bunch of money at bars and that just went away.” said Mr. Parker. “Other than your streaming service, you’re not going out and spending a lot of money.”
For the first stimulus payment distributed in spring 2020, nearly 60% of those who received or expected to receive a payment reported that they planned to spend the check on expenses. Paying off debt was the second most reported use, at 13%, by respondents to the Census survey in June 2020.
Credit scores have continued to improve, and credit-card debt has dropped for the first time in eight years, according to Experian. The credit-reporting company reported consumer credit-card debt was down 14% in 2020. Average credit-card debt held by millennials dropped 11%.
Experian also reported people…
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