Americans have been saving more of their stimulus checks, according to research from the Federal Reserve Bank of New York. In the first round of stimulus, recipients spent approximately 29% of their checks, then 26% of the December 2020 stimulus and 25% of the stimulus arising from the American Rescue Plan Act.
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The bank surveys about 1,300 households every month to ask about their economic expectations and financial behaviors. Surveys in January and March included questions about how they planned to use stimulus checks, if they received one or planned to receive one.
In January, an average 16% of stimulus was being set aside for essential spending, the survey found, while 6% was being earmarked for nonessential spending, and 3% was intended for a donation. The remainder was being split between paying down debt, and savings and investments.
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“These shares are very similar to those we found for the first round of stimulus checks, where households reported spending 29%, saving 36%, and using 35% to pay down debt,” according to the bank.
Almost a third of respondents in the March survey had received their stimulus check, and 55% of those who hadn’t expected to receive one. They said they had spent or planned to spend 25% of their check, including 13% on essential spending and 8% on nonessential.
“We find remarkable stability in the actual and expected uses of stimulus checks across successive rounds, with average [marginal propensities to consume] of around 26%, and with most of the funds going towards saving and debt payments,” according to the bank.
Other surveys have come to similar conclusions. The bank cited research from the National Bureau of Economic Research that shows 27% of stimulus money was used for consumption. Another NBER study found consumption was much higher at 42%, while 31% was used to pay down debt and 27% was saved.
Looking at actual changes in consumer spending and saving, the bank found that real aggregate consumer spending and real personal income both increased in January, coinciding with the second round of payments. However, spending remains below pre-pandemic levels while personal savings is nearly 20%, according to the bank.
“Our findings indicate that in an environment that continues to be characterized by constraints on many activities and by high unemployment, as well as high uncertainty about the duration and continued economic impact of the pandemic (including elevated uncertainty about future inflation), fiscal support continues to impact predominantly savings instead of consumption, with households planning to use the third relief payments mostly to pay off debt and save,” the authors wrote.
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