With the third stimulus check in the bank accounts of most Americans, conversation about a fourth is already on everyone’s mind.
Related: Most Americans used stimulus checks to pay bills
Surveys of the last two stimulus checks showed that people spent the majority to pay debts. About a quarter used the money for regular expenses, according to the Census Bureau. But Biden’s popular $ 1.9 trillion aid plan left consumers wanting more.
If another payment eventually arrives, what is the smartest way to spend it? Here are some suggestions on how you can consider using any additional stimulus payments.
How do you get a stimulus check deposit?
Before you get a stimulus check, you need to qualify. For the third stimulus check, the IRS used its tax return status and the adjusted gross income (AGI) of its most recent income tax return to determine the amount of the stimulus payment. According to the American Rescue Plan Act (ARPA), you and your dependents are eligible for a total payment of $ 1,400 if:
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You are an individual with an AGI of up to $ 75,000
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You are the head of the household with an AGI of up to $ 112,500
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You are a couple presenting together with an AGI of up to $ 150,000
To put this in context: a couple who earn $ 100,000 and files together, with two children, will receive $ 5,600 – which is $ 2,800 for adults and $ 2,800 for both children.
Payments were $ 1,400 per individual or $ 2,400 for joint filers. Those with children received an additional $ 1,400 per child. This means that a couple who earn $ 100,000 and files together with two children will receive $ 5,600 – $ 2,800 for adults and $ 2,800 for both children.
Find out: could you start receiving monthly stimulus payments?
How do you spend a stimulus check?
If you receive a stimulus check, you are free to do what you want with it. However, there are some options that are more financially prudent than others. Instead of asking how you can spend your stimulus check, you should at least consider how to invest your stimulus check. Here is a look at some of the best ways to use your stimulus check.
1. Pay your bills
If you have any outstanding or overdue accounts, use your stimulus check to pay them. Since the stimulus payment is essentially “free money” from your prospect, it is a great way to pay your bills without having to dig into your emergency savings or your regular paycheck.
2. Pay off high-interest debts
Debt is a killer when it comes to savings, especially high-interest debt, as you’ll find with credit cards. If you take your stimulus check and pay off the high-interest debt, it’s like getting a free double-digit return on investment. For example, if you owe $ 1,000 on a card that charges 15% interest, you are paying $ 150 a year in interest. Using $ 1,000 of your stimulus check to pay off that debt saves at least $ 150 a year, or the equivalent of a 15% return on investment on your money.
3. Start an Emergency Fund
Most Americans have trouble saving for emergencies. In fact, a recent GOBankingRates survey found that almost 70% of Americans don’t even have enough savings to cover a $ 1,000 emergency. If you want to boost your emergency fund, save your $ 1,200 stimulus check and you will be immediately ahead of the game.
4. Save for retirement
Just as it is difficult to save for emergencies, it can be a struggle to save for retirement. However, the sooner you start, the better. Since the stimulus check equals “found money,” there is no problem on your part in depositing that money into your retirement plan. Say you put $ 1,200 in an IRA and earn 7% a year. After 20 years, that “free money” will become almost $ 5,000.
See: Steps for retirement planning that you are not doing right now, but should
5. Give as a gift
Some Americans were blessed during the pandemic and do not need any additional stimulus money. If you find yourself in this field, don’t just waste the money – give it to a needy person or institution. In addition to making the world a better place, you can deduct taxes for your donation – in that case, you will still receive a monetary benefit from the second stimulus check.
6. Improve your home
You are likely to be spending a lot more time at home during the pandemic, as it is more difficult to leave the house. Your company may even allow you to work from home. If so, consider taking your stimulus test and using it to make some improvements to your home. You will not only enjoy a renovated space, but will be able to add value to your property.
7. Keep it in a high-yield savings account
Interest rates are at historic low levels, but you can still get a decent return on your money by finding a good high-yield savings account. Although the major banks do not offer much interest on idle money, many online banks still pay more than 0.50% APY. These types of fees won’t make you rich, but if you just park the money until you need it, it’s much better than earning 0%.
8. Add to your long-term investments
If you already have all of your immediate financial needs covered and have a sizeable emergency fund, consider adding your stimulus check to your long-term investments. Over time, your stimulus money will grow at a compound interest rate and increase the value of the savings you have already started to build. What may seem like a small stimulus payment today can end up growing considerably over time.
Take a look: 7 best long-term investments to consider
9. Save for your kids
With the cost of college education rising faster than the rate of inflation, every small amount you can add to your child’s college fund can help. To get the best return on your investment, consider investing in a 529 college savings plan. These types of plans offer tax advantages and many investment options and can be a great way to increase your savings for college.
Invest in yourself
Unemployment hit the American economy hard last year. Regardless of whether you have managed to escape harm or not, it is always a good time to retrain, learn some new skills and become more marketable. Using your stimulus check to invest in yourself by taking a course or otherwise keeping your training up to date can be a great way to stand out in an uncertain job market.
10. Help local businesses
American companies have been hit hard by the coronavirus pandemic. You may have noticed that some of your favorite stores or restaurants have closed. To help prevent further economic disasters in your community, take your stimulus check and help some of your local businesses.
Find out: Biden’s stimulus gave schools billions to reopen safely – why are so many still closed?
Is a fourth round of stimulus checks coming?
Many said it was unlikely, but a Data for Progress poll says about 65% of Americans are in favor of at least a monthly payment of $ 2,000 a month.
Many in Washington believe it will be difficult to guarantee a fourth payment with Biden’s focus on the infrastructure bill and a goal of vaccinating 90% of adults by June. Still, another relief may be on the horizon. Child tax credits and unemployment insurance extensions could replace another direct stimulus check.
If more stimulus arrives, it is a good idea to have several options at hand where to best invest the money.
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Georgina Tzanetos contributed to the reporting of this article.
This article was originally published on GOBankingRates.com: Fourth stimulus check may be coming: 10 smart ways to spend it