Michele Schneider, Editor-in-Chief of the MarketGauge Group, Scott Martin, CIO of Kingsview Wealth Management and Nicole Webb, Senior Vice President of Wealth Enhancement Group, discuss their outlook for the market.
Incentive payments have been a pandemic lifeline for many Americans. For some young adults, they have provided the opportunity to build up savings or pay off debts.
According to recent data from the US Census, most adults who reported receiving the second stimulus check, issued around the new year, used household expenses, including utilities and telecom payments.
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Uses for the incentive payments varied by age group. About 54% of people between the ages of 25 and 39 reported on the Census survey that they mostly used the stimulus money to pay off debt, and 26% said they mostly saved it from January 6-18. . In comparison, about 57% of people between the ages of 40 and 54 said they mostly paid off their debts, and 22% said they mostly saved it.
Some are torn about what to do with the $ 600 given the uncertainty surrounding the economy, the pandemic, and the possibility of more stimulus measures.
“If you can’t expect what will happen in the coming months, you have no reason to actually release it,” said Cameron Turner, 23, who lives in Berkeley, California. While Ms. Turner has remained employed by her public relations job, she decided to put the check in her rainy day savings account.
With an unemployment rate of 6.3%, many Americans remain concerned about financial security. Last week, 779,000 workers applied for unemployment benefits, according to the Ministry of Labor.
Normally, on average, half of stimulus checks are issued by humans, says Jonathan Parker, a professor at MIT Sloan School of Management who has studied the use of economic impact payments in both the 2001 and 2008 recessions. While it’s too early to demographically differentiate the use of the checks for 2021, he said this time is definitely different.
“The ability to consume has been shut down in many dimensions. So there are a lot of people who used to go to restaurants and nightlife and spend a lot of money in bars and that just went away. “said Mr. Parker.” Besides your streaming service, you don’t go out and spend a lot of money. “
For the first incentive payment released in spring 2020, nearly 60% of those who received or expected to receive a payment reported that they intended to spend the check on expenses. Paying off debt was the second most reported use, at 13%, by respondents to the June 2020 Census survey.
According to Experian, credit scores have continued to improve and credit card debt has declined for the first time in eight years. The credit reporting company reported that consumer credit card debt was down 14% by 2020. Millennials’ average credit card debt fell 11%.
Experian also reported that people have reduced their credit usage and delinquencies in 2020.
Some say they feel obliged to do away with financial obligations.
Ruth Estrella, 28, who hasn’t had a stable job since May, deposited the $ 600 on her credit card with the lowest balance. In doing so, she said she felt she was making progress in paying off her debt.
“It’s something, but it’s nothing,” she said.
Even for some people who issued their first stimulus check, the second has sometimes turned to paying off debt or saving.
For Kate Sumser, a law student who lives in San Francisco with her partner, using the stimulus check for savings or debt was not an option. Their first incentive check went to rent, groceries and bills. The couple relies on her student loans to make ends meet.
When they got their second incentive check earlier this year, they immediately knew the money was going to go towards paying for their credit cards.
“The ideal would have been to save it,” she said. “But there was no choice.”
Ms Sumser hopes 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 put in savings accounts continues to rise. 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 significantly since April last year, said Matthew Tarka, a recent graduate working in finance. He was willing to spend some of his initial stimulus check on a plane ticket to see his parents last spring. Still, he said the duration of the pandemic has made him and his friends think differently about this payment.
“I think people are probably saving a little more this time, because I know a lot of people who have been out of work since the last incentive check came out,” he said. “I see that my friends are a bit more economical with this.”