Stimulus Relief Checks: Less Spending, More Saving

Starting last week, the COVID-19 stimulus funds began hitting the bank accounts of citizens nationwide. All in, the $290 billion program – part of the $ 2 trillion CARES Act that was passed earlier this month – will send $1,200 per adult and $500 per child to the vast majority of working- and middle-class U.S. households. 

It is not a completely unprecedented effort on the part of the U.S. government. In 2001, the government gave most households up to $600 ($875 adjusted for inflation) and in 2008 handed out up to $1,200 per household. The goal in both cases was the same: to stimulate spending among consumers in an effort to prop up a sagging economy.

And in those cases, Jonathan Parker, an economist at the Massachusetts Institute of Technology, told the Boston Globe, the attempt was pretty successful. Further research indicated that customers did exactly what the government had hoped: They spent roughly 90 percent of it on durable consumer goods like cars and appliances. But this time around, when the economy as a whole has been shut down by design, these checks are less of a stimulus program than a safety net.

“The purpose now is to make sure people survive,” he said.

It’s an observation backed both by PYMNTS' recent data on consumers’ financial lives as well as the early information on how the 88 million consumers who had received their payments by the end of last week have actually been expending them.

The majority of consumers now expect that this pandemic will stretch into next fall, and that even when it’s “over,” their lives will be either somewhat or drastically altered. Among those surveyed, 32 percent report that they will perform more activities at home and fewer activities away from home than before, and 16.1 percent say they will not resume any of their pre-outbreak activities once the pandemic has passed.

As of now, their working lives have been dramatically altered: 39.9 million people report having lost their jobs within the span of a month, and 61.4 percent reported they were worried about losing their jobs in the future. On top of that, 60 percent of those surveyed reported living paycheck to paycheck, and the majority reported having personal savings insufficient to ride out the current crisis.

Given the triple threat of economic insecurity hitting the population, it’s unsurprising that the data also indicates increased belt-tightening sweeping the nation. Nearly three-quarters of those surveyed reported ordering from restaurants less, 59 percent reported grocery shopping less and 51 percent reported shopping for non-grocery items less.

It also explains some of the data on how consumers are spending – and expect to spend – their stimulus checks.

According to data from digital bank Current on early stimulus receivers, about 45 percent of the funds have been spent, and food was the preferred spending category. Sixteen percent bought food directly (including from restaurants and takeout locations), while another 9 percent spent the funds at grocery stores.

“Clearly food is an issue, people are struggling,” Current CEO Stuart Sopp told CNBC. “They’re just trying to survive, and I think that’s what the stimulus was all about.”

That syncs up with data from Cowen and Co., which also demonstrated that many people (19 percent) planned to spend the money mainly on food, and another 34 percent reported the funds would be put toward upping their grocery budget. That Cowen survey also noted that spending on other necessities would eat up a large majority of stimulus spend: 18 percent of consumers will put the funds toward paying off or paying down debt, 11 percent plan to spend the money on paying their mortgage or rent, and 10 percent will use the money to purchase gas. And even among consumers who don’t have an immediate need for the money, the first impulse isn’t necessarily to spend it. According to the survey, nearly a third (31 percent) plan to deposit the funds in their savings accounts.

Under normal circumstances, we would take those plans with a grain of salt – many people plan to put cash windfalls into savings, but the funds never quite end up there – but this situation is a little different. That is indicated by the numbers, and by recipients themselves. Emily Foster Day, a co-director of the Boston Center for the Arts, has already taken a pay cut and has no way of knowing when the events business from which they draw their revenue will come back. Next year’s budget is a mystery, she told the Boston Globe – which meant when her stimulus funds arrived, they went straight into rainy-day savings. 

“It could’ve been a nice little bump for us,” she said. “But I’m pretty concerned about the future.”

She’s clearly not alone in those concerns, as lots of stimulus funds are finding their way into savings accounts instead of actually stimulating spending. But if consumers won’t spend on anything that isn’t an absolute necessity – like food, transportation or housing – and are more enthusiastic about hoarding their cash, it’s hard to see how those funds will stimulate much of an economic recovery for the legions of suffering businesses.



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.