With the third stimulus check in most Americans’ bank accounts, talking about a fourth is already on everyone’s mind.
Related: Most Americans Used Stimulus Checks to Pay Bills
Surveys from the last two stimulus checks showed that people spent most of it on paying off debts. Another quarter or so used the money for regular expenses, according to the Census Bureau. But Biden’s popular $ 1.9 trillion relief plan has left consumers wanting more.
If another payment finally arrives, what is the smartest way to spend it? Here are some suggestions on how you might consider using additional stimulus payments.
How do I get a stimulus check deposit?
Before you can get a stimulus check, you will need to qualify. For the third stimulus check, the IRS used your filing status and the adjusted gross income (AGI) from your last tax return to determine the amount of the stimulus payment. According to the American Rescue Plan Act (ARPA), you and your dependents qualify for the full payment of $ 1,400 if:
You are a person with an adjusted gross income of up to $ 75,000
Head of household with adjusted gross income of up to $ 112,500
You are a joint filing couple with adjusted gross income of up to $ 150,000
To put this in context: a couple who earn $ 100,000 and file a joint return, with two children, will receive $ 5,600, that is, $ 2,800 for both adults and $ 2,800 for both children.
Payments amounted to $ 1,400 per person or $ 2,400 for joint taxpayers. Those with children received an additional $ 1,400 per child. This means that a couple who earn $ 100,000 and apply jointly with two children will receive $ 5,600 – $ 2,800 for both 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 get a stimulus check, you can do whatever 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 reverse your stimulus check. Here are some of the best ways to use your stimulus check.
1. Pay your bills
If you have any outstanding or overdue bills, use your stimulus check to pay them. Since the stimulus payment is essentially “free money” from their perspective, it’s a great way to pay your bills without digging into your emergency savings or your regular paycheck.
2. Pay off high-interest debt
Debt is a killer when it comes to savings, especially high-interest debt like those you’ll find with credit cards. If you take your stimulus check and pay off that 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 per year in interest. Using $ 1,000 from your stimulus check to pay off that debt saves you at least $ 150 per year, or the equivalent of a 15% investment return on your money.
3. Start an emergency fund
Most Americans have trouble saving for emergencies. In fact, a recent GOBankingRates survey revealed that nearly 70% of Americans don’t even have enough in savings to cover a $ 1,000 emergency. If you want to reactivate your emergency fund, save your $ 1,200 stimulus check and you’re immediately ahead of the game.
4. Save for retirement
Just as it is difficult to save for emergencies, it can be difficult to save for retirement. However, the earlier you start, the better. Since the stimulus check equals “found money,” there is no problem on your part putting that cash into your retirement plan. Let’s say you deposit $ 1,200 in an IRA and earn 7% annually. After 20 years, that “free money” will turn into almost $ 5,000.
See: Steps to Planning for Retirement You Are Not Taking Right Now, But You Should
5. Give it away
Some Americans have been blessed during the pandemic and do not need any additional stimulus money. If you are in that field, do not just spend the money, give it to a person or institution in need. In addition to making the world a better place, you may be able to get a tax deduction for your donation, in which case you will continue to receive a monetary benefit from the second stimulus check.
6. Improve your home
You are likely to spend much more time at home during the pandemic, as it is more difficult to get out. Your company may even allow you to work from home. If that’s the case, consider taking your stimulus control and using it to make some home improvements. Not only will you enjoy a renovated space, but it will also increase the value of your property.
7. Store it in a high-yield savings account
Interest rates are at record lows, but you can still get a decent return on your money if you find a good, high-yield savings account. While the major banks don’t offer much interest for idle cash, many online banks still pay more than 0.50% APY. Those kinds of fees won’t make you rich, but if you’re just parking the money until you need it, it’s a lot better than earning 0%.
8. Add to your long-term investments
If you already have all of your immediate financial needs covered and you have a sizeable emergency fund, consider adding your stimulus check to your long-term investments. Over time, your stimulus money will grow at a compounded interest rate, adding to the savings you’ve already started to build. What might seem like a small stimulus payment today could end up growing by a considerable amount over time.
Take a look: the 7 best long-term investments to consider
9. Save for your children
Since the cost of a college education increases faster than the rate of inflation, anything you can add to your children’s college fund can help. To get the most out of 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 has hit the US economy hard over the past year. Whether you’ve managed to escape harm or not, it’s always a great time to retrain, learn some new skills, and make yourself more marketable. Using your stimulus check to invest in yourself by taking a class or keeping your training current can be a great way to stand out in an uncertain job market.
10. Help local businesses
American businesses 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 more economic disasters in your community, take your stimulus check and help out with 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 up?
Many have said it is unlikely, but a Data for Progress survey indicates that approximately 65% of Americans favor at least a monthly payment of $ 2,000 per month.
Many in Washington believe it will be difficult to secure a fourth payment with Biden’s focus on the infrastructure bill and the goal of vaccinating 90% of adults by June. Still, another relief could be on the horizon. Child tax credits and unemployment insurance extensions could substitute for another direct stimulus control.
In case more stimulus arrives, it is a good idea to have several options on hand about where to best invest the money.
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Georgina Tzanetos contributed reporting for this article.
This article originally appeared on GOBankingRates.com: Fourth Stimulus Checks May Be Coming – 10 Smart Ways to Spend It