Is it wrong to save or invest your 2008 economic stimulus check?
Yesterday I got a note in the mail from to IRS reminding me to file my 2007 return so I can get my 2008 rebate check if I am eligible. What a waste of paper and postage! Unless you’ve being living in a hole you’ve already heard about it. It’s not like they sent out a note to remind everyone to take their telephone tax credit last year and people still figured that one out ok…
There has been much speculation about the American public’s potential use of their 2008 economic stimulus check. It is often suggested in the media that people will save it instead of spending it, causing little in the way of economic stimulus.
Suppose common American people “save” their check. They will deposit it in a regular bank account, likely earning 1% or less interest. While the idea of online high yield savings accounts is old news in the personal finance blog community, I’m not quite sure its as accepted elsewhere. The bank will in turn lend this money out to somebody else, probably at a much higher rate, and the bank will earn more money. Effectively saving money ends up with several “economic stimulus” benefits: increased liquidity for lenders, interest revenue for banks, and increased confidence of the consumer whose emergency fund is now larger.
Suppose common American people “invest” their check. This has the obvious effect of increasing the value of American companies. It also earns money for their broker, who may earn a commission on the trade. It may earn more money for their mutual fund who now collects more fees. Lots of potential beneficiaries in this scenario as well.
About the only thing that might actually be a “waste” of the stimulus effect is an investment in precious metals or foreign stocks which are unlikely to have any direct stimulus effect on the US. So in conclusion, do whatever you want with your check just don’t send it overseas!
