MarketGauge Group Editor-in-Chief Michele Schneider, CIO Scott Martin, Cview Scott Martin, and Senior VP Nicole Webb, Wealth Enhancement Group, on their market prospects.
Stimulus payments have been a lifeline for many Americans. For some young adults, they offered the opportunity to build up savings or pay off debt.
According to recent data from the U.S. Census, most adults who receive the second stimulus check, issued around the new year, have to pay for household expenses, including utilities and telecommunications.
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The use of the stimulus payments varies according to age group. About 54% of people between the ages of 25 and 39 reported in the census survey that they mostly used the stimulus money to pay off debt, and 26% said they mostly saved it during the period from 6 to 18 January. By comparison, about 57% of people between the ages of 40 and 54 said they mostly paid off debt, and 22% said they mostly saved it.
Some are worried about what to do with the $ 600, given the uncertainty surrounding the economy, the pandemic and the possibility of more stimulus.
“If you can not expect what will happen in the next few months, you have no incentive to spend it,” said Cameron Turner, 23, in Berkeley, California. her job in PR, she decided to put the check in her rainy savings account.
With the unemployment rate at 6.3%, many Americans remain concerned about financial security. According to the Labor Department, 779,000 workers applied for unemployment benefits last week.
Normally, on average, up to half of the stimulus tests are spent by humans, studied Jonathan Parker, a professor at the MIT Sloan School of Management who studied the use of economic impact payments in the recession in 2001 and 2008. Although it is too early to make demographic distinctions in the use of the 2021 checks, he said that this time is definitely different.
‘The ability to consume is disabled in many dimensions. So there are a lot of people who regularly went out to restaurants and entertainment and spent a lot of money at pubs, and it just disappeared. says Mr. Parker. “Except for your streaming service, you don’t spend a lot of money.”
For the first stimulus payment distributed in the spring of 2020, nearly 60% of those who received or expected a payment reported that they intended to spend the check on expenses. Debt repayment was the second most used, with 13%, by respondents from the June 2020 census survey.
Credit scores continued to improve and according to Experian, credit card debt fell for the first time in eight years. The credit reporting company reported that consumer credit card debt fell by 14% in 2020. The average credit card debt that millennials own has dropped by 11%.
Experian also reported that people reduced their credit usage and offenses in 2020.
Some say they are obligated to avoid financial obligations.
Ruth Estrella, 28, who has not worked stably since May, put the $ 600 on her credit card with the lowest balance. In doing so, she said she feels she is making progress in paying off her debt.
“It’s something, but it’s nothing,” she said.
Even for some people who spent their first stimulus test, the second sometimes went to debt repayment or savings.
For Kate Sumser, a law student living with her partner in San Francisco, using the stimulus check for savings or debt was not an option. Their first stimulus check was for rent, groceries and bills. The couple relied on her student loans to make money.
When they received their second stimulus checks earlier this year, they knew immediately that the money would be paid to pay off their credit cards.
“The ideal would have been to save it,” she said. “But there was no choice.”
Me. Sumser is hopeful for a new wave of stimulus. But until the pandemic is under control, she expects to take on more and more debt.
Meanwhile, the amount of money people are raising in savings accounts is rising. An analysis by the Federal Reserve Bank of New York found that consumers saved more than a third of the first stimulus checks.
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The mood has changed markedly since April last year, said Matthew Tarka, a recent graduate working in finance. He was willing to spend part of his initial stimulation test on a plane ticket to visit his parents last year. Yet he said the duration of the pandemic made him and his friends think differently about this payment.
“I think this time people are probably saving it a little bit more, because I know a lot of people who have been unemployed since the last stimulus test,” he said. “I see my friends are a little sober with this.”