When Sarah Harkness landed her first post-college job at a public relations firm in New York City, she was eager to get all the trappings of an adult life: a professional wardrobe, some adventures abroad, and her very own apartment. But when coronavirus hit, she realized all those expenses didn’t leave her with much of a safety net. So, when she got her $1,200 stimulus payment from the federal government, she knew just what to do with it and sent it straight to her savings account. 

For Samantha Ruotolo, the calculation was different. Having been in the workforce for a few years and on stable financial footing, she got her stimulus check and decided to spend it all.

The coronavirus pandemic has left more than 20 million people out of work. For them, federal stimulus payments have been a lifeline, allowing them to pay rent, make car payments and meet other crucial expenses.

But tens of millions of others, like Harkness and Ruotolo, are still working and haven’t suffered an immediate financial shock. The path of the recovery will depend, in part, on what they do: Will they, like Harkness, save their stimulus checks and cut their spending? Or will more of them be like Ruotolo and spend their sudden windfall? Their choices will impact the country’s path to economic recovery.

Congress passed a historic $2 trillion stimulus package at the end of March, designed to provide a safety net to Americans as the impact of coronavirus rippled across the country. Those earning $75,000 or less would qualify for a direct payment of $1,200, with married couples earning up to $150,000 eligible to receive $2,400, with an additional $500 per child.  The payment decreases incrementally up until an income of $99,000. 

The money is intended to keep Americans afloat as bills continue to roll in, even as unemployment reaches unprecedented levels. The checks are also designed to incentivize spending; consumer activity accounts for 70% of the economy, a sizable portion that has slowed considerably as businesses are forced to close and Americans shelter in place. 

When she first graduated from college, Harkness found herself commuting four hours from her home in Princeton, NJ, to her new job, until she saved just enough to move to Hoboken, dramatically decreasing her time spent on NJ Transit. Her newest goal is building up her emergency fund. 

“Everything just got a lot more real,” said Harkness. “I always knew it was something I should have, but it was never a priority. Now, it is.”

An unprecedented global pandemic with no definitive end in sight is something of a wake-up call for many, even if they haven’t lost their jobs. Combined with widespread shutdowns across businesses in an attempt to keep Americans at home and “flatten the curve,” temptations to go out to a fancy dinner or book a trip are virtually nonexistent. Exacerbated by uncertainty ahead, many stimulus checks will go straight to savings as a priority.  

“There’s nothing more sobering than seeing your neighbor, your sister, your brother, lose a job. It’s a really shocking thing,” said Christopher Low, chief economist at FLN Financial. “If you have more than a handful of friends you know someone who is waiting to get called back to work. That emergency fund you’ve been meaning to start for years, it seems like it’s a good time to start now.” 

For many individuals, saving might absolutely be the clear and rational decision. Having access to a lump sum of cash is vital to being able to afford necessary expenses to survive as the economy continues to free fall.  

For the economy to recover, however, we need people to spend.  While building financial stability is certainly important, saved stimulus checks will not have a significant impact on the economic road ahead, especially towards the hope of a V-shaped recovery.  

For those who have been able to accumulate enough savings to feel comfortable weathering the storm, receiving an influx of cash may lead to a different outcome.

“I’m going to spend it all on someone I really care about,” said Samantha Ruotolo, 27. “And that person is me.”

So far, Ruotolo has started a flourishing plant collection, and invested in an array of quarantine hobbies including needlepoint and a candle making kit. She finally pulled the trigger on a kelly green beanie that reads “boys lie” she’s had her eye on, and a disco ball. She also makes a point to order takeout to support her favorite local restaurants twice a week. 

Those who are able to spend their stimulus checks in the short-term, like Ruotolo, could cushion the blow of economic fallout and provide a much-needed lifeline to retail sales, which dropped a historic 17.9% last month.

“The hope is that people put it back into the economy,” said Low. “That’s why congress was so eager to spend the money.”

In 2008, a smaller stimulus package of about $100 billion was passed, sending Americans checks of up to $1,200. Whereas the current stimulus is primarily aimed to help keep Americans afloat by assisting with bills and food, the 2008 checks were intended to encourage spending on commodities like electronics, to boost the economy.  

A study conducted by the National Bureau of Economic Research examining how those checks were used found that 48.2% of Americans used their stimulus check to pay off debt, 31.8% saved it, and 19.9% spent the money. The portion who spent the money tended to do so immediately, and therefore did not have a big impact on the second and third quarters of 2008. While there was still a sharp drop in economic activity, the stimulus checks were effective in softening the economic blow that happened later in the year.   

The big difference between 2008 and 2020 is that our economic shutdown is self-imposed. Ideally, the economy would reopen and bounce back relatively quickly. However, extended lockdowns, slow progress of developing a vaccine, and an uncoordinated national effort to reopen the economy is keeping Americans inside for longer than they anticipated, potentially shifting consumer behavior permanently.  

“These types of things change people,” said Low. “People are more careful. They don’t throw money around, and they’re careful about savings. More likely they have every intention of spending it at some point, but by the time the recession ends they will have forgotten that intention.”