Questions students should ask about their stimulus check
Originally published Thursday, April 15, 2021, for Money & Media class, Georgetown University’s School of Continuing Studies
Many college students will be eligible for the first time for federal coronavirus-related stimulus checks. Independent students who meet the criteria could receive $1,400 under the latest COVID-19 relief bill. This money could help students meet financial goals — if done the right way
Being financially independent, according to the IRS, is defined as a single tax filer who provides their own financial support — and for the stimulus check, someone whose income does not exceed $75,000. A financially dependent person is an individual who is 17 or older and whose parents/guardian claims them on their taxes. Unlike independent students, dependent students will qualify for a relief check that goes directly to their parents.
After figuring out if they qualify for a stimulus check, many students will be asking, ‘How do I spend this money?’ Below is a list of questions students should ask themselves before spending their stimulus check. Two certified financial planners, Kevin Mahoney, founder of Illumint and Cady North, founder of North Financial Advisors shared their advice with students.
What is the stimulus check for?
Unless they have been following the news regularly, most students may not even realize why they are receiving $1,400 in their bank account. Mahoney said students need to take a step back and look at the theory behind the stimulus check and why they are receiving it.
“At least part of the reason why this is happening is to make sure that people have the money they need to spend on the things they need in their lives,” Mahoney said. “And certainly, there’s a big economic component with that too, where people are really focused on saving every last dollar or making sure that they have enough for next week or next month.”
What is my living situation like?
Since individual circumstances can vary widely especially for students, according to Mahoney, they should consider if they have enough money for essentials like groceries, toiletries, or medicine. He said they should also consider paying larger expenses like rent or car loans.
“Certainly, at the end of the day, one of the big goals is making sure that you’re going to be as financially stable as possible during this time,” Mahoney said.
Do I have enough money for an emergency?
Pandemics create uncertainty, and emergencies happen, even to students. North said there is uncertainty in the economy as well, and students should take stock of their finances and see if they have a cash buffer.
“The best rule of thumb, probably as a student would be to have at least three months’ worth of your expenses covered, a quarter’s worth, a semester’s worth even, so that if something happened to your income sources or if something happened to what you have going on, you have some cash cover and you don’t have to worry too much or go into debt in order to cover expenses,” North said.
Should I pay down some of my student loans?
The answer, according to North, is no. She said additional provisions are coming from the Biden administration to forgive student debt and student debt generally does not have a high-interest rate.
What if I am a dependent and my parents are getting my stimulus check?
If this is the case, as it is for many students whose parents include them as dependent on their taxes, Mahoney said you should probably have a conversation with your parents. This could be, asking if they are sending the money, discussing outstanding financial agreements, or your parents telling you they are keeping the money on your behalf, Mahoney said.
What should I not spend the stimulus check on?
“GameStop stocks,” Mahoney said.
“I would say don’t run out and buy Bitcoin with this money,” North said.
