Did the stimulus checks improve household balance sheets?

Abstract

Even before COVID-19 brought the economy to a halt, about 40 percent of U.S. households said they lived on such tight budgets that they could not easily smooth small financial shocks. The question is how the pandemic affected the finances of these vulnerable households. On one hand, the shutdown of the economy resulted in salary cuts and job losses that put pressure on many households, leaving them even less prepared for small expenditure shocks. On the other hand, most households received Economic Impact Payments (EIP) totaling several thousand dollars; and those who lost their jobs got expanded Unemployment Insurance (UI) benefits that often more than replaced lost income, at least initially. In addition to preventing economic hardship, the hope was that this financial assistance would improve household balance sheets, enabling them to better weather financial shocks and avoid falling short on longer-term goals such as retirement savings.