If You Had Invested Every Stimulus Check, Here's What You'd Have Today
The federal government sent three rounds of stimulus checks in 2020 and 2021. And yes, the stock market has performed well over the last six years and you’d have more than doubled that “free” money if you had invested it.
But the real story behind investing stimulus checks isn’t about the stock market at all. It’s about discipline in the face of crushing uncertainty.
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Here are the numbers — and more importantly how you can do better with your own investments moving forward.
What You’d Have Today
The CARES Act in March 2020 sent Americans checks for $1,200 per qualifying adult and $500 per child. In December, the Coronavirus Response and Relief Supplemental Appropriations Act sent another $600 per eligible adult and child. And a final round of “stimmie” checks went out in March 2021 through the American Rescue Plan Act, paying $1,400 per qualifying adult and child. A single American would have collected $3,200 back from the government’s tax coffers, while a family of four would have received $11,400.
“If a single American had invested each check when they received it, into an S&P 500 index fund with dividends reinvested, by May 2026 it’d have grown to over $7,500,” said Andrew Izyumov, certified financial advisor and founder of 8Figures.com.
Granted, some investments have beaten the S&P 500 since then.
“The AQR Long-Short fund has performed very well over the last five years," said financial advisor Michael Harris of Emory Wealth, "but it lagged over the prior 10-year period: a reminder that no single strategy leads forever. At certain points, the private credit fund would have outperformed the S&P 500, even though equities ultimately finished stronger. Long-term investment success often comes from disciplined asset allocation and rebalancing, not chasing whichever asset class has performed best most recently.”
Compounding returns are wonderful of course. But that’s hardly news. The real story revolves around behavioral finance.
Investing Through Fear and Uncertainty
In spring 2020, many people genuinely feared the world would end. It took enormous discipline to keep investing through those eerie early months of the COVID-19 pandemic.
“You would have had to invest in the midst of a market crash and terrifying headlines,” said financial advisor Cody Schuiteboer of Best Interest Financial. “You were rewarded for investing not because of your foresight, but rather because of your ability to do so despite the fear and uncertainty. And almost no one can do that without a process eliminating the element of human decision-making.”
For some, that means automating their investments with a robo-advisor. For others, it’s hiring a financial planner to manage their investments and talk them off the ledge when they panic.
Regardless, your emotions are your own worst enemy when it comes to investing.
Margin of Safety
For Americans with no emergency fund or other safety net, those stimulus payments went straight to paying bills. In many cases, they went to paying off debts from spending right up to the limit of their earnings (often beyond).
Those Americans didn’t make a decision about whether to invest, fear-based or otherwise. The idea of investing never crossed their minds, because they were living on the financial edge.
“There’s a growing disparity between households that can put a windfall to work and those that exist in survival mode,” Schuiteboer said. “That disparity will compound over a lifetime.”
If you don’t have an emergency fund and aren’t saving and investing some of each paycheck, you need to find a way out of that doom loop. That might require a major financial reset, such as moving in with family for a few months to build a cash cushion and stronger budgeting habits. But you have to get out of survival mode and into a cycle of saving and investing if you want to get ahead financially.
The Next Panic
In 2020, it was the pandemic. In 2008, it was the Great Recession and housing crisis. Next time it will be something else, but the same principles apply.
“This time” always feels different, feels like the financial system might collapse. And you need a plan for continuing to invest through that new global panic, whatever triggers it in the first place.
Schuiteboer summed it up succinctly: “The story of who gets ahead is about the difference between those who automate their money and those who wait until they're ‘ready.’ The latter group is still waiting.”
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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