Consumers should use their direct cash payment portion of $ 2 trillion coronavirus help package adopted by the Senate on basic essentials – or put the funds in an emergency savings account, say personal finance and financial experts.
Government support provides up to $ 1,200 per person up to certain income limits, with an additional $ 500 per child. IRS will determine eligibility based on the individual tax return for 2018 or 2019. If a taxpayer has not filed them yet, they will have to do so to receive their payment.
“Before this is over, millions of people will lose their jobs,” said Elise Gould, senior economist at the Economic Policy Institute, a nonprofit think tank that focuses on issues affecting low- and middle-income workers. “This will help cover some of these gaps.”
For consumers who have already lost significant income or fear a layoff is imminent, the money should be spent on basic things like rent, groceries, prescriptions, gas and utilities, said Greg McBride, financial analyst at Bankrate.com.
Consumers who want to ease the pressure on their household budget should also contact the lender for their mortgage or car loan to request a temporary withholding of their monthly payments and talk to creditors to discuss other repayment options, he said.
If consumers are still working and their needs are met, they should put this money in their emergency savings account. If they do not have one, now is the time to open one.
The savings should be in an easily accessible, safe, floating place – not a mattress or shoebox that can be broken into. Instead, look into a money market fund or high-yield savings account, Nilay Gandhi, senior financial adviser at Vanguard Personal Advisor Services, told NBC News.
How the payments will be spent will be up to the individual, Gandhi said. If their family has a household budget, the funds should be considered within the budget. If the family does not have a budget, now is a good time to draw one up.
Households that are financially secure and already have their basic and savings pillow covered may be able to use the funds to add their savings to their child’s education or pension.
It can households who are well equipped financially to cope with the outbreak and want to help those who have more needs donate their reimbursement to a charitya local food bank or a group that fights the disease, such as CDC Foundation.
While some have referred to the aid package as a “stimulus” for the economy, others say it is more of an “income support program.”
“Generally, when governments try to stimulate the economy, a transfer of cash can allow people to spend more, buy more, eat more out, all of which help keep the economy growing,” said Aparna Mathur, a resident researcher. at the American Enterprise Institute, a conservative think tank.
Once people have been asked to shelter in place and take all precautions, they will not go out and spend more.
“The idea of the stimulus is not to boost the economy now, but rather to support financially stressed households and prevent consumers from falling further behind,” McBride said.
The purpose is to feed families, keep a roof over your head and keep the lights on. It’s not about shoppers spending more than they usually do.
Maybe when the pandemic is over, if there is some extra money left, they can probably be spent on something more than covering the essentials.
“The stimulus aspect of money transfer may play a role later on when the health crisis is behind us,” Mathur said.
Despite the millions of dollars being sent out, Gould says she does not think the payment to consumers will be enough.
“It’s a one-time check,” she said. “They still have to pay their bills month after month.”