Americans are using a majority of their stimulus money to pay off debts and for savings, according to a survey from the Federal Reserve Bank of New York.
Respondents said in the New York Fed’s Survey of Consumer Expectations that for the third round of stimulus checks, which sent $1,400 to eligible Americans, that they planned to spend around 25% of the total payment, to save about 41% and use the remaining 34% to pay down debt.
These responses show a slight drop in how much Americans planned to spend compared to the first two rounds of relief payments, which also comes with a minor rise in how much is going straight into savings accounts. By comparison, Americans planned to spend 29% of their checks and only save 36% during the first round of checks, which were worth $1,200 in March 2020, according to the survey.
The third round of stimulus checks was included in the $1.9 trillion American Rescue plan signed into law by President Joe Biden on March 11. More than 130 million checks worth $335 billion have already been sent out, the IRS said.
How people are spending their stimulus money depends on household income and education level, researchers said. For instance, households with less than $40,000 income expect to use 44% of their second stimulus check for paying down debt while households making more than $75,000 used 32% of their money towards debt. Households making more than $75,000 spent 24% of their stimulus check while lower-income households spent 27%.
Spencer Richards, 32, of Utah said he used the first two stimulus checks for rent and food and has lost two jobs during the pandemic, according to CNBC. Richards said he plans to use the third check on a surgery that health insurance won’t cover fully.
“I worry about the potential consequences of our government taking on so much debt so quickly, but the payments have benefited my family greatly,” Richards said.
Households without a college degree expect to use 37% of their third stimulus payment towards debt while households with a degree said they plan to use 27% for that same purpose.
One college student, Varsha, told Vox that the $1,400 stimulus check is going towards bills.
“My monthly income as a graduate student is $2,000, and the stimulus is $1,400. It’s not even one month of expenses. I’ll use the stimmy to clear the important bills first, and if there’s any left over I’ll get better headphones for Zoom,” Varsha said.
New York Fed economists said that the findings show “high unemployment, as well as high uncertainty about the duration and continued economic impact of the pandemic.”
“As the economy reopens and fear and uncertainty recede, the high levels of saving should facilitate more spending in the future,” the researchers said. “However, a great deal of uncertainty and discussion exists about the pace of this spending increase and the extent of pent-up demand.”
Stacey Starkey, 37, said it’s been difficult to find work while homeschooling her 11-year-old daughter and will use her stimulus money to pay for overdue bills, CNBC reported.
“I intend to do what’s best [and] make it stretch as far as possible,” Starkey said.
The New York Fed’s Survey of Consumer Expectations has a sample size of 1,300 households. Data for the second and third stimulus checks came from the January and March 2021 surveys, which had 1,062 and 1,007 respondents respectively. Data on the first round of payments came from the June 2020 survey with 1,423 respondents.