For many Americans, the $1,400 stimulus check received as part of the $1.9 trillion American Rescue Act is the third such payment they’ve received since the COVID-19 pandemic swept through the United States more than a year ago. And if you take a look at what many Americans are spending this $1,400 on, you’ll start to question if this round of stimulus payments was really even necessary.
Stimulus payments, conceptually at least, are supposed to be a stopgap payment that recipients can use to make ends meet while they wait for the economy to recover. And according to economists, that’s still largely the case with this batch of $1,400 checks. In fact, it’s estimated that about 75 percent of Americans are using these payments to get by and purchase essential items.
So what about the other 25 percent? Studies show that the other 25 percent of stimulus check recipients are likely those who have been relatively unscathed from an economic standpoint throughout the pandemic — and they’re using this latest round of payments to treat themselves for enduring the likes of lockdowns, mask mandates, gathering limits and other COVID guidelines over the past 13 months. There’s nothing wrong with this type of spending, as it helps to stimulate the economy, even if it’s not providing direct assistance to people as initially intended.
What Are Americans Spending the Stimulus On?
It’s worth noting that Americans who are splurging represent a much smaller number than those who are using stimulus payments for essential items. In fact, according to the U.S. Census Bureau, close to 60 percent of respondents in a recent survey reported they were spending at least some of their payments on food. About 45 percent reported spending payments on utilities and about 36 percent on household supplies. Other significant spending categories are as follows:
- Paying down debt (30 percent)
- Rent or housing (25 percent)
- Vehicle payments (21 percent)
- Clothes (10 percent)
- TV, electronics, furniture (6 percent)
- Recreational goods (3 percent)
What’s interesting about this survey is that only about 15 percent of respondents reported allocating some money for savings. And saving — or investing — any leftover funds could present some significant gains if you’re able to follow through with it.
Why Investing in the S&P 500 Makes Sense
If you’re among the many Americans who are planning to splurge on a luxury item with your stimulus check or have leftover money after taking care of some essentials, experts advise investing in the S&P 500. It’s at a near-record high and has produced an investment return of 14 percent over the past decade. That’s a significant return on investment that can potentially become a viable long-term wealth growth strategy. It’s something to consider before buying a new 4K big-screen TV or the luxury brand purse that you’ve had your eye on for the past several years.