Did stimulus funds help?
Congress provided most households with several Economic Impact Payments (EIPs). Here's how they were used.
The pandemic has added financial pressure to people and households already struggling to make ends meet, not to mention save for long-term expenses and retirement. Even before the pandemic, about 40 percent of households indicated they would have trouble paying an unexpected expense of $400.
Those with substantial assets were more likely to benefit from the strong stock market last year, according to a new report from the Center for Retirement Research at Boston College titled “Did the Stimulus Checks Help People with Unexpected Expenses?”
But those without meaningful assets experienced two opposing forces, said the report. On one hand, job loss put pressure on balance sheets and made it even harder for some to prepare for small expenditure shocks, while many households also received stimulus checks totaling thousands of dollars.
Congress provided most households with several Economic Impact Payments (EIPs). Single households earning less than $75,000 and married households earning less than $150,000 received cash payments totaling up to $3,200 and $6,400 respectively. Households with dependent children received up to $2,500 more for each child.
How did households use these payments?
According to the report, people who lost their jobs, were asked to take unpaid leave, or experienced a pay cut during the pandemic were likely to have used the EIPs to make ends meet.
The report noted that the percentage of people who said they could not cover an unexpected $400 expense dropped from 51 percent to 36 percent between April and July 2020.
However, those benefits were reversed by the end of the year, at least in part because COVID-related supplements of $600 per week to uninsurance benefits expired.
For households that kept their jobs, these payments were sometimes directed toward creating a financial buffer.
The report found that among workers who kept their jobs, the share reporting difficulty covering a $400 expense dropped to one-third early in the pandemic from about 40 percent pre-pandemic. That percentage remained roughly the same throughout the year.
Some households that remained employed were able to accumulate precautionary savings and reduce debt, the report said.
Among those who kept their jobs last year, 35 percent had less debt than in the previous year, compared to about 30 percent in 2018 and 2019, said the report.
“While the first EIP mostly allowed those households that lost their jobs to make ends meet, early indicators suggest that the second and third EIPs helped many improve their balance sheets,” said the report.
“About three-quarters of households saved their second and third EIP checks or used them to pay down debt, and this share was similar, regardless of job loss status.”
The report based its analysis on data collected for the 2020 Study of Household Economics and Decisionmaking (SHED) conducted by the Federal Reserve Board in November 2020 and the U.S. Census Bureau’s Household Pulse Survey, which has been conducted weekly since the beginning of the pandemic.
Kristen Beckman is a freelance writer based in Colorado. She previously was a writer and editor for ALM’s Retirement Advisor magazine and LifeHealthPro online channel. She also was a reporter for Business Insurance magazine covering workers compensation topics. Kristen graduated from the University of Missouri with a degree in journalism.
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