The predominant use of the $1,400 stimulus, 'is paying monthly bills and day-to-day essentials': Bankrate CFA

Bankrate Chief Financial Analyst Greg McBride joined Yahoo Finance Live to break down how Americans are spending their $1,400 stimulus checks.

Video transcript

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SEANA SMITH: Millions of Americans got $1,400 in stimulus payments recently. But according to a new Bankrate study, about 2/3 of Americans say that's only going to last about three months.

So we want to bring in Greg McBride. He's with Bankrate, Bankrate's Chief Financial Analyst. And Greg, it's great to speak with you again. When you take a look at numbers like this, you have to start scratching your head when we're trying to figure out where we are in this economic recovery. How far do we have to go when we see numbers like this, that Americans, that a stimulus payment isn't going to last more than three months and a majority of people are using this for either their day-to-day expenses or their monthly bills?

GREG MCBRIDE: Yeah, we're on the third round of stimulus, and we have only seen slight improvement from one round to the next in terms of how important it is to people's short-term financial well-being, how long they think it's going to last, and how they plan to use it. Now some common themes. Still, the predominant use is paying monthly bills and day-to-day essentials. And that has not changed over the last 13 months, since the first round in March of last year.

ADAM SHAPIRO: And you're seeing different results for different generations. What stuck out to you, say, Baby Boomers versus Gen X?

GREG MCBRIDE: Yeah, a couple of things. Some not surprising in the sense that much like unemployment, where that has hit lower income households and women more than men, we see that in terms of the responses with regard to how long this is going to last or how important it is to near-term financial well-being. Gen Xers and Baby Boomers stood out. They had the highest likelihood of saying that this money wasn't even going to last one month, although every age group had at least 30% responding that way.

SEANA SMITH: Greg, when you take a look at some of these numbers, about 45% say that they plan to use it for monthly bills, 36% say they use it for day-to-day essentials. How does this compare to your studies when you looked at it after the previous stimulus payments?

GREG MCBRIDE: Those numbers, they continue to lead the pack, as they have in each of the first two rounds, but they really haven't changed very much. The monthly bills has come down a little bit. And then the using it for day-to-day essentials, that's been pretty consistent. So they continue to be at the top of the pack.

Where we see the movement, we've started to see more people using at least some of the money for paying down debt. Savings has been very consistent, about 28, 30% every time we've done the poll. And this time, we finally did see an uptick in the percentage of people that are going to be use it for discretionary spending or investing. But still, very small numbers, only about one in eight using any of the money for discretionary spending, and only about one in nine doing investing with this money.

ADAM SHAPIRO: So when we heard from Jamie Dimon this morning, talking about the pool, the huge amount of cash that consumers have to spend and really boost the economy, what is either Jamie Dimon missing or what are you seeing is reflected to what he's saying, because he's seeing real-time numbers, but you're also seeing real-time numbers in the results of what people are saying how they need this money, the stimulus?

GREG MCBRIDE: Well, we are very much seeing a K-shaped consumer recovery. And much like the letter K, there's one group of Americans that their financial fortunes are better than they ever have been and they're getting better. And unfortunately, there's a group of Americans where their finances have gone from bad to worse. And we see that reflected in terms of how much people need this money, the fact that it's not going to last very long, and how this money is being put to work.

But we've also seen the fact that people have a little bit more savings now than they did pre pandemic. In a separate poll we had done earlier, we found that the percentage of Americans with no emergency savings was the lowest in the last decade that we had been looking at that. So you know, people have put a little bit of money away. But those that have seen income disruptions, they may well be burning through that at a pretty rapid pace. And I think the results of this underscore that.

SEANA SMITH: Greg, do you think we need a fourth round of stimulus payments?

GREG MCBRIDE: Well, the number that jumps out to me is that more than 40% of households say they're bringing home less money now than they were prior to the pandemic. And so that illustrates that there's an ongoing need. So I don't know if stimulus is the right word. I think certainly something that is targeted toward those households that have had ongoing income disruption. And those where we're seeing the rising long-term unemployment, I think there's going to be an ongoing need there. Just how targeted we can get toward that I think is the big question.

ADAM SHAPIRO: Very quickly, we saw, from a different guest, but a similar survey, that among millennials who got stimulus checks, something like 30% used it to invest. And the individual who shared that with us pointed to the GameStop phenomenon and Robin Hood. Anything in these numbers indicating what they saw that you're seeing as well?

GREG MCBRIDE: Yeah, we did see a parallel. We saw that those under age 40 were four times as likely to invest some or all of this money than their counterparts over the age of 40, so I think really very much in tune with the meme stocks frenzy that we've seen this year, and very counter to what we had seen pre pandemic, when younger Americans were very reluctant to get into the stock market.

SEANA SMITH: Greg McBride, always great to speak with you. Greg McBride of Bankrate.