How to Spend Your Stimulus Check to Help Your Family and Your Community

If you're going to spend that check, think locally.

Okay, so you got your stimulus check, which means if you’ve got an extra $2,400 bucks that you weren’t counting on. With even more payments potentially on the way, and couples having big discussions (and maybe arguments) about the money, the big question is — how are you going to spend it? Assuming you’re still employed, and you don’t desperately need this money to cover basic needs for your family, you might be trying to decide how to spend this money responsibly.

It’s called a stimulus for a reason. The idea here is to, perhaps, stimulate the economy. So, arguably, you might want to think of spending the money in a way that actually helps the economy on which you — and your family — rely. Still, there aren’t easy answers to this question — we have to think about not only what we want for ourselves, but how our communities look going forward. What’s the smart way to spend this money?

First of all, it must be noted that, compared to total income for the year for most people, the $1200 or $2400 amount per household is actually fairly small. “There will be some people where this is a huge windfall but for most, it’s not going to actually be that much money,” says Dr. David Mitchell, Director of the Bureau of Economic Research and Director of the Center for Economic Education at Missouri State University. “It depends on where you are in the country, of course, but for the most part this isn’t all that much.”

As he closely understands the tendency for people to want to spend “free” money, Mitchell adamantly advises anyone who is unemployed or employed but unsure about the future of their work to save their money for rent, food, and other such essentials. “This is obvious,” he says, “but it does bear repeating.”

He also wants to emphasize another economical decision: investing. “If you have a high tolerance for risk and can afford to put the money away, going to the stock market is not a bad idea because, in essence, you’re buying the dip,” he says. “Even if the market falls another 5 or 10 percent, over the long term, when you retire, that money will have grown to a significant amount. If you have three to six months of expenses saved and have a Roth IRA that is tax free, then that’s where you might want to put it.”

Now, if you want to spend, which Mitchell says is also a good idea if one can afford it, the most worthwhile decision is to put it into restaurants, shops, and other services in your local economy. Why? It’s not only good for your community, but also your own self-interest.

This all comes down to Economics 101. “If the unemployment rate in your local community falls to 30 percent and its 18 percent in the rest of the country, home prices are going to come way down, the community’s going to suffer.”

Supporting businesses in your neighborhood keeps them open, employing individuals, and keeping the local economy humming. “I, for one, will be ordering more take out than usual. Spending it locally keeps your economy working as well as it possible can,” Mitchall says. “Here’s an example. Say you’re a college kid and want to work at a local restaurant while you attend college to pay the bills. If the restaurant is open and you have a job, then you have the money to go to school If it’s not open, then likely you don’t go to school.” Large scale, these changes have effects on the local economy because there are less people that attend the local college and it may shut down, hurting the economy even more. There are 1,000 examples just like this.

Michael Montgomery, a former international economist for the U.S Department of State specializing in trade and who now owns Montgomery Consulting, agrees with spending locally.

“If you want to maximize the positive impact of your stimulus check,” he says, “buy goods and services locally – even if you have to wait until after social distancing is no longer in-effect to do so.”

Here’s an example Montgomery poses would be a great way to spend that stimulus check: If a couple pooled their check so they could buy new kitchen counters. “Kitchen counters would typically be made in the US, be bought from a company in your home community, shipped by US companies, and installation would be contracted to a local company,” he says. “At each step of the process, your purchase supports US and/or local jobs with some of those jobs – notably in manufacturing and installation – generally being pretty good jobs with the potential for producing significant in-direct or spin-off economic benefits as workers involved in making and installing your new cabinets then make their own purchase.”

Just as there are ways to positively spend the stimulus check, there are also ways to negatively do so. Montgomery says that if you want to minimize the positive economic impact of your stimulus check, the best way to do that would be to go online and spend it on imported goods.

“That way US companies and workers derive only very limited benefit from your purchase – the online retailer made a little money as did the organizations that fulfilled and delivered your order,” he says. “But, relatively few US direct jobs of any type would be supported by your purchase and many of those jobs would not be very good jobs – which would minimize the in-direct or ‘spin off’ benefits of your purchase.”

So, if you intend to spend that stimulus check, think locally. The decision is not only helpful for struggling businesses right now but also for future you. And don’t you want to be in good standing with your future self?