Does It Make Sense to Invest Your Stimulus Check?

Millions of people will receive a new round of stimulus checks under President Joe Biden’s American Rescue Plan. The Biden-Harris Administration indicates about 85 percent of households are eligible to receive payments of $1,400 or more, depending on family size and income.

If you receive a stimulus check and don’t need to use the money right away, financial expert Latoya Smith suggests you consider using at least some of the funds as the launch point to begin investing. Smith, along with Ernest Gains, is co-founder of a Black-owned stock market and trading educational company called The Profit Room.

Smith is passionate about financially empowering the Black community. She has more than a decade of professional experience in the investment banking sector and private portfolio management world. Below, she and Gains share five tips with ESSENCE that could potentially help boost your bottom line.

1. Utilize and benefit from free market and information:

Our ancestors were shielded from access to financial information and resources, says Smith, but now there are a multitude of ways to find the information one needs—from apps, to online financial firms that allow customers to invest online. “The stock market doesn’t care what color you are. All it knows is money. Your broker doesn’t look up your address. It’s a free market, your money is valued equally in the marketplace, and today we have access to the same information as our peers when investing,” she said.  

2. Narrow the Black wealth gap:

For 400 years, structural racism has produced a stark wealth gap between Black and white Americans. According to the Center for American Progress, the typical white household holds 10 times more wealth than the typical Black household.

“In the past, a lot of discriminatory practices prevented us from creating generational wealth. Times have changed, so we need to catch up! We have better jobs now, many of which may offer retirement and financial services, giving us another advantage of being able to invest in the stock market. Contributing to a stock market investment plan throughout your career can set you up for success,” said Smith. 

3. Set an example for future generations:

Smith says that if our children and young people observe how we handle money, including investing, they are better equipped to make sound future financial decisions and build generational wealth.

4. Diversify what we own:

Investing in the stock market is another way to diversify one’s assets and provide pride in ownership.

In fact, investing in companies you love or products you use by becoming a stock owner can be a financial vehicle. “It can generate 20 to 30 percent more return than in other investment areas like real estate. It beats your money sitting in the bank too. When you leave money in the bank, inflation erodes the value of the dollar, and your money loses value over time. Every year the price of goods and services goes up, so you’ll pay more money for the same thing. Historically, the stock market has beat inflation, meaning that your saved money has a higher value,” said Smith.  

5. Consider getting started:

There is no longer a certain amount of capital needed to invest.

“Today, some institutions have products and services that allow you to begin investing with $10 at a time and build your way up. And the government has several products that allow your investments and retirement accounts to grow tax-free legally. Consider investing in your favorite Black-owned businesses,” said Gains, who adds that this helps to stimulate the economy.

Internal Revenue Service (IRS) officials have announced that the third round of Economic Impact Payments have begun reaching households. The first batch of payments will be sent by direct deposit, which some recipients have already started to receive, with more in the coming weeks.

Additional batches of payments will be sent by direct deposit and through the mail as a check or debit card. The vast majority of these payments will be by direct deposit. No action is needed by most taxpayers; the payments will be automatic and, in many cases, similar to how people received the first and second round of Economic Impact Payments in 2020. People can check the Get My Payment tool on to see the payment status of the third stimulus payment.

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