AUSTIN, Texas — The first round of federal COVID-19 stimulus funds are starting to hit Texas bank accounts. Economists say spending the money will have the greatest impact on the overall economy.
- Stimulus checks starting to come in
- Some people are choosing to save it instead of spending it
- Economist says intent of the money is to spend it
For Austin resident Laura Connolly, the direct deposit was a nice surprise.
"I wasn't looking for it necessarily. I was kind of just checking my bank account,” said Connolly.
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Others, like San Antonio resident David Garcia, have been on the lookout for their direct deposit.
"Been anticipating it,” said Garcia. “You know, kind of seeing, reading updates on when the check was supposed to come in for everybody."
The $1,200 boost to their bank accounts isn’t essential to either Garcia or Connolly. Garcia is gainfully employed as an insurance account representative and Connolly is working as a personal chef. The extra cash is purely discretionary for them.
"For me this is kind of more security and some more buying power to help out some small businesses and local businesses around town that may be struggling right now,” said Garcia.
"It's definitely just a nice bonus for my savings account. I'm saving up for a house, so that'll just be very helpful for that,” said Connolly.
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While no one is going to tell you how to spend your money, Dr. Michael Sadler, professor of economics and finance at the University of Texas at Austin, said spending that money is the intent behind the mass payout.
"Not that an economist would ever discourage people from saving - obviously for the long term that's extremely important,” said Sadler. “But when you're in an economic downturn like this, especially one as severe as this, what we need is people spending that money."
Sadler said it all has to do with what economists refer to as the multiplier effect.
"People spending that money becomes somebody else's income. People then have - the people in that establishment that have more income to spend somewhere else,” said Sadler. “This is how an economy recovers."
The multiplier effect still exists even in the situation of paying rent and paying bills, since that money still goes to employ someone else. But for those who aren’t necessarily strapped for cash, spending your stimulus funds with smaller, local businesses will have the greatest impact. Sadler says many of those retailers and companies don’t have the cash on hand to survive the longer non-essential businesses remain closed.
Donating the money isn’t discouraged by Sadler, but he says it may not have the same economic impact it could have depending on how the donation is eventually spent.
For the latest information from the CDC go here.