Should You Be Saving Your Stimulus Check?

While the next round of stimulus checks hits your account, it's easy to think about what could be done with more than a thousand dollars.

But, should you be saving your stimulus check money? The second check did not offer much to save-$600 can go very quickly.

However, the next round is set to deliver $1,400 or more to families across the country. That amount could represent a significant nest egg for some families and jump-start a savings account or an emergency fund.

So, is now the time to save that cash?

How to spend that stimulus money is a dilemma that some households will face in the next few months, so here is what we recommend.

Why Spend Your Stimulus Money Now

If you should save or spend your stimulus money, should come down to household needs. Here are some sample questions to think over:

• Are we ahead on our bills?
• Do we have any serious outstanding debts?
• Our are jobs safe?

If immediate needs are all taken care of, well, it might be wise to save your money.

However, if you do want to splurge on something or address a family need that was hard to afford on a monthly income, it might be wise to spend now. Economists are predicting an increase in inflation of up to 4% in 2021, which means higher prices for almost everything in the months ahead. Buying now could mean more bang for your buck.

You also could join millions of fellow Americans who heeded the government's call and spent their stimulus money locally. Everyone knows how hard this pandemic has hit small businesses, and spending this money in establishments near you not only helps them, but it might make you feel better, too.

Why Save Your Stimulus Money

Probably the best reason to save the stimulus money can be summarized in a single word: uncertainty.

Who knows how long the pandemic response will drag on, and with it fewer employment opportunities? At the moment, cases are dwindling and the vaccines are making a difference. However, this is a very unpredictable virus and the end is not near. For this reason, it might be wise to have that extra padding.

https://www.forbes.com/advisor/personal-finance/50-ways-to-spend-third-stimulus-check/

Also, remember that when inflation rises, so do interest rates. Think credit cards. If you save, you'll earn interest on a savings account instead of paying off a credit card debt. With that in mind, perhaps pay off some debt now with the stimulus money, and lessen the debt load overall while you can.

Another way to get the stimulus money out of your hands (where you might be tempted to spend, especially now that more businesses are re-opening) would be to put it in a money market or investment account. The stimulus money might be a wonderful opportunity to get involved in the stock market, with buy-low opportunities on stock that can be held a bit until the pandemic dust settles-read this for a barometer on that issue.

Financial advisers suggest having at least six months' worth of expenses saved, for single-earner households, and three months of expenses saved for two-earner households. Studies suggest fewer Americans heed this advice (a 2018 analysis estimated that almost a quarter of U.S. households have less than $400 available in bank accounts).

Right now may be the ideal time to save for that "rainy day" fund because it could "rain" at any moment thanks to COVID-19.