Here's how to use your $1,200 stimulus check from the government's coronavirus relief package

Aimee Picchi | Special to USA TODAY

Show Caption Hide Caption CARES Act stimulus check: How much could you receive When you get your stimulus check and how much you get depend on several factors.

Millions of workers and their families will receive a one-time check from the government as part of the coronavirus stimulus package. Most adults will get $1,200, while children will receive another $500.

For workers who have already lost their jobs because of the pandemic’s hit to the economy, that extra money will likely be immediately put to good use — paying rent, mortgages, utility bills and more. But if you have a paycheck, what’s the best use of that money? Should you save it, pay down debt or spend it to help keep your local economy working?

It’s a tricky calculation given the unknowns facing many families, such as whether the pandemic will linger for months or if businesses will resume normal operations within weeks. Layoffs are rippling through the economy, not only hurting restaurant workers but professionals such as lawyers and insurance providers. On top of those “what ifs,” America’s outstanding credit card debt and other types of revolving debt have reached an all-time high.

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“The natural reaction is to use it all to pay down debt,” says Matt Schulz, chief industry analyst at CompareCards. “Paying down debt is a good thing, especially in crazy economic times, but it can make a lot of sense to take a little bit of that money you were going to put toward debt and stash it in a rainy-day fund.”

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The fact is, four in 10 adults say they would struggle to come up with $400 in an emergency, according to the Federal Reserve’s annual check-in on Americans’ financial health. Given that millions of Americans are likely to face a fiscal crunch in the coming weeks, they should consider putting part of that stimulus check aside for that potential emergency, experts say.

A financial buffer during coronavirus

Financial experts typically recommend socking away between three to six months of income in an emergency fund, a goal that may seem out-of-touch with the daily realities of many families even in the best of times.

But research from the JP Morgan Chase Institute has shown that most households need much less than that to create a helpful financial buffer — in fact, six weeks is typically enough. (You can use this widget at JP Morgan Chase to determine the size of your ideal buffer.)

While that might represent a big chunk of your stimulus check, having the money set aside can help you avoid a cycle of high-interest debt, Schulz notes.

“Some people might be thinking their job is fine, but who knows? COVID-19 might permeate through our culture for a long time,” says Chantel Bonneau, wealth management adviser at Northwestern Mutual. “If you don’t have an emergency fund, that’s a great opportunity to start one.”

Make sure your emergency fund is liquid and carries no risk. In other words, don’t sock away the money in the stock market. Instead, your savings account is an ideal place to stash some of the cash until you need it.

“In this particular case, it's not necessarily about maximizing your return as it is providing yourself with a little bit of security by having that money available,” Schulz notes.

Credit-card debt

After you’ve seeded your emergency fund, you may want to put part of that stimulus money to work by paying down high-interest credit cards, financial experts say.

Take some time to list your debts and your interest rates, which could help you decide which cards to pay down first.

There are two methods for paying down credit card debt, the snowball and the avalanche. The first prioritizes small wins by paying down cards with the lowest debt, while the avalanche tackles cards with the highest rates. Determining which method to use will depend on whether you’re motivated by quick wins or tackling big objectives.

While you’re figuring out which method to use, put in the legwork to clean up your financial life, Bonneau recommends.

“Create a balance sheet: look at all your liabilities and assets and interest rates,” she says, adding that it can help you get a grasp on your financial standing and make decisions such as whether to refinance your mortgage. “Half of my clients have really jumped on this and realize [the pandemic] is their opportunity to get organized.”

Local spending

Lastly, consider spending some of that money locally to support businesses that are hurting from the coronavirus impact.

“That injection of funds in the economy can really make a difference,” Schulz notes. “Your $50 at a local restaurant might not seem like a big deal,” but it can make a big difference if more people opt in.

But that doesn’t mean taking the stimulus check on a shopping spree, he cautions.

“It's a little like having a higher credit limit on your credit card,” Schulz notes. “it's important to be thoughtful with this money.”