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Money-Smart Ways to Spend Your Stimulus Check

The tens of millions of people who became unemployed during the COVID-19 pandemic likely know how they’ll spend their stimulus checks. Bills for essential expenses don’t stop even when a paycheck does.

But if you’re fortunate to still be working and not in need of the money for yourself or family members, here are five ways you can use the cash (typically $1,200 per adult plus $500 for most children, depending on salary and most recent tax return) to improve your finances — or that of others.

  1. Build — or replenish — an emergency fund. Use the money to maintain three- to six-months' worth of living expenses in an interest-bearing savings account for unexpected events, such as a job loss.
  2. Contribute to an IRA. The April tax deadline has been extended to July 15. That means you have until then to make a 2019 contribution to a traditional or Roth IRA. The IRA contribution limit for 2019 is $6,000 ($7,000 if you're age 50 or older). Or, if you already made last year's contribution, get a jump on your 2020 contribution.
  3. Pay off credit card debt. With annual interest rates on credit cards now averaging around 16%, this is likely consumers' most expensive debt. Paying it off or wiping out a chunk of it can potentially save you hundreds of dollars in interest and eliminate debt months faster. 
  4. Donate to charity. While you need to file an itemized tax return to deduct charitable gifts, Congress made an exception because of the pandemic. Up to $300 in donations made this year will be deductible on your 2020 tax return — whether you itemize or not.
  5. Support small businesses. Buying a gift card from a local restaurant, salon, or other business that's been forced to temporarily close or scale back can provide them with much-needed cash now. And you can use your card when the businesses fully reopen.

If your or a loved one’s employment has been impacted by the pandemic, please see the employment transition resources from ICMA-RC.

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