How a family should spend theirs

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President Biden has signed the third – and largest – Covid-19 stimulus package aimed at bringing additional relief to millions of Americans and their families.

The $ 1.9 trillion American Rescue Plan Act includes a variety of measures in addition to the extension of unemployment benefits: another round of stimulus checks, extended child tax credits, subsidies for health insurance, aid to restaurants and funding for the distribution of vaccines and the reopening of schools.

Most notable for American families who meet the income thresholds to receive a stimulus check of $ 1,400, the definition of an eligible dependent has broadened to include both children and adults of any age who meet the legal criteria. Eligible families can receive $ 1,400 per dependent, so an average family of four (two parents and two dependents) could receive a total of $ 5,600.

Here are the income limits for receiving a full stimulus check for $ 1,400:

  • Single taxpayers whose adjusted gross income is less than $ 75,000 (completely eliminates at $ 80,000 or more)
  • Head of taxpayer whose adjusted gross income is less than $ 112,500 (completely eliminated at $ 120,000 or more)
  • Married taxpayers jointly filing with adjusted gross income less than $ 150,000 (eliminates completely at $ 160,000 or more)

Unlike the first two Economic Impact Payments issued in 2020 – $ 500 per dependent with the first and $ 600 per dependent with the second – where dependents had to be 16 years of age or younger, qualifications expanded for dependents allow even more money into families’ pockets. Thinking group Popular policy project estimates that 13.5 million additional dependent adults will now be included in their household income.

So what do you do with over $ 5,000 of essentially “free” money?

David Wells, a certified family wealth advisor, suggests that any family eligible for stimulus money consider leaving the windfall in their bank account for 30 days before making their decision.

“We tend to spend money quickly that we didn’t mentally budget for,” Wells adds.

Below, CNBC Select spoke with Wells about his best strategies for how the average family of four should spend their $ 5,600 raise amount. Assuming the family has a job and can afford basic expenses (like food and shelter), he suggests considering these three categories when choosing how to spend your family’s stimulus money.

1. Category “Homework”

Or should Are you spending extra money right now to prepare for financial success? If you have a balance on your credit card, that debt is expensive due to double-digit interest rates. Maybe you think this is something you should pay for.

“It’s no fun, but the peace of mind that it will bring as you get out of debt is something that will benefit you every month,” Wells said.

Use your stimulus money to speed up your credit card debt repayment

Transfer your credit card debt to a credit card balance transfer which offers an interest-free period that allows you to actually reduce your balance. Depending on how much balance you have, you can use a portion of the $ 5,600 in increments over a series of months. A balance transfer card like the American bank Visa® Platinum card offers no interest for the first 20 billing cycles on balance transfers and purchases (after, 14.49% – 24.49% variable APR).

Another category “should” is a emergency fund. Wells adds that putting $ 1,000 to $ 2,000 of your $ 5,600 stimulus payment into a necessary rainy day fund can dramatically reduce your stress the next time unforeseen expenses arise.

2. Category “Fun”

What would be fun to spend? Lead a game of your stimulus money towards something fun for the family to do. How much of this portion depends on how much you have left after covering what you “should” spend, such as paying off your credit card debt or adding to your emergency fund. If you don’t have credit card debt and already have a sufficiently stable emergency fund, you can spend more of the $ 5,600 on something memorable for the family.

With the increase in vaccine distribution, a family summer vacation may be worth considering. “You can set a budget amount and let the kids help plan the event,” says Wells. “Anticipation is half the fun, then find a way to commemorate it after the fact, like making a photo book. “

Start planning your “fun” expenses

While waiting for the end of winter, take advantage of this time to open a budgeting app. Most of the apps are linked to your bank accounts so you can designate where that stimulus money goes once it’s deposited.

Honeydue is a good option for spouses to budget and set goals together, and it’s free to use. Learn more about the best budgeting app for couples.

3. Category “A blessing for”

As the past year has been financially tumultuous for many, families may want to consider designating some of their $ 5,600 stimulus money to give back.

Consider finding a local pantry or community organization near you that you can use your funds to help. You can also make a charitable donation to a nonprofit or private foundation of your choice.

“It will help the family focus on their own blessings and receive the joy of being able to help someone else,” Wells said.

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Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.


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