Rebate checks: Save it, don’t spend it

Taxpayers will start receiving “rebate” checks this May, said Loren Steffy in the Houston Chronicle. Congress and the administration hope consumers will spend that money and give the economy a much-needed boost. But why should we? Many Americans who are mired in debt would be wiser to simply save the proceeds. By resisting the urge to spend our checks “like drunken hedge fund managers,” we might just reverse the “borrow-and-spend mentality” that’s largely responsible for getting us into this mess. When the check comes, tuck it away in a savings account or certificate of deposit, or invest it in your retirement account or tax-free college savings plan for your kids. If you don’t have the luxury of saving, pay off high-interest debt or prepay your monthly expenses such as insurance. Spending our checks isn’t going to save the economy, after all. But pocketing them could give our finances a cushion for a rocky year ahead.

Remarkably, it seems that typically free-spending Americans are set to heed such advice, said Tom Van Riper in Forbes.com. According to one recent survey, a majority of consumers say they’ll use the checks—which are expected to be as much as $600 for individuals and $1,200 for couples—to put aside savings or pay off debt. Only 27 percent of the taxpayers surveyed by financial services company American Century Investments said they planned to spend the money. “Not that the stimulus package won’t have some positive effect on spending”: Even those who save money will probably loosen their hold on the household’s purse strings slightly in the coming year. But, “with a pervading sense that the party is over, at least for a while, most Americans view the coming rebate checks as a gift to be used to get the savings accounts they’ve mostly blown off in recent years back up to speed.”

Why wait for a stimulus check? said Michelle Singletary in The Washington Post. “You don’t have to wait for the official word that we are in a recession to start shoring up your own financial house.” Start out with a “fiscal fast,” recommends Jeff Yeager, author of The Ultimate Cheapskate’s Road Map to True Riches. Other than the absolute basics, spend nothing for a week or even longer. Can’t do it? “It should tell you something even more important about the life you’re leading and how you’re wasting money,” Yeager says. But you might discover something remarkable: “You can enjoy life more by spending less.”

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up