Stimulus Checks: Where to Stash Your Cash

April 25, 2008— -- The checks are in the mail. Millions of Americans will start getting checks from the government next week aimed at stimulating the economy.

To find out more about the stimulus package CLICK HERE, and to learn when you should be getting your rebate, CLICK HERE.

Many will pay off bills or other debt. Some will spend their checks buying new goods as the government hopes. And yet others will stash the money away for a rainy day or retirement.

So if you are looking to add to your nest egg, where is the best place to put the money?

"The government might not like to hear it, but certainly, I would allocate some of that money to paying down debt if you have any, particularly higher interest rate credit card debt," said Bruce Tucker, principal at Sterling Financial Planning in Sparta, N.J.

What Do You Plan to Do With Your Check? Tell ABC News

For those who don't have debt and are looking to invest in stocks, he suggested a low-cost stock market index fund. You can tell how much in annual expenses you'll pay by looking at a fund's expense ratio. For example, a .50 ratio means you'll pay $5 in annual expenses for every $1,000 you invest.

"If you're buying an S&P 500 index fund, you're probably going to be fine if you are holding it for 10 years or more," Tucker said.

He also suggested putting some money into a 529 college savings plan. These plans are sponsored by each state, though you can invest in any state's plan. Though contributions aren't shielded from federal taxes, your return is free of federal taxes provided it's used for education.

"It's not a huge windfall for most people," Tucker said, "but any time you have any extra dollars come in you ought to be prudent in your thinking as to what your family might need."

David McPherson, the founder of Four Ponds Financial Planning in Falmouth, Mass., and an ABCNEWS.com columnist, suggested an investment in international stocks either through a mutual fund or exchange-traded fund. ETFs are traded on the exchanges but hold many stocks for diversification and their expenses are generally low.

"Many American investors lack sufficient exposure to foreign company stocks, even though we use products made by Toyota, Nokia and Nestle every day of the week," McPherson said. "In a global economy, you need at least some international investments. Start small and build from there."

McPherson warned that the stimulus payment by itself may not be large enough to meet the minimum initial investment required for some international mutual funds.

Will Americans Spend the Money?

The first of the checks will arrive Monday via direct deposit. Nearly 7.7 million Americans will receive their tax rebates electronically in that first week. Payments are made depending on the last two digits of the main tax filer's Social Security number.

Those whose Social Security numbers ending in 00 through 20 should get their payments first, followed the next week by those with 21 through 75 and then everybody else.

Tax filers who did not give the IRS direct deposit information will get a paper check. Those will be mailed out in phases starting May 9, and it will take about two months to mail all the checks, again in order of the last two digits of Social Security numbers.

"This money is going to help Americans offset the high prices we're seeing at the gas pump and at the grocery store, and it will also give our economy a boost to help us pull out of this economic slowdown," President Bush said this morning.

Depending on income, Americans will get up to $600 a person, $1,200 for couples and $300 for each dependent child.

An ABC News/Washington Post poll last week found that only 17 percent of Americans believe the so-called rebate checks will help the economy. That is down from 28 percent in February.

Just a quarter of Americans say they'll spend the money; most plan instead to sock it into savings (32 percent) or use it to pay existing bills (31 percent). These intentions haven't changed since February.

Gas, Savings or a New TV?

Kim L. Wilczyk and her husband plan on using their cash to put gas in their tank and food in their refrigerator.

"I'm looking forward to these rebate checks just so I don't get buried deeper," said Wilczyk of Saint Paul, Minn.

Between medical bills and rising food and gas prices, she said her family is really feeling the squeeze.

"Buying new clothes is the furthest thing from our minds right now," Wilczyk said. "We will not be putting this money out to buy anything fancy like vacations, TVs, appliances -- anything fun. It will just be for basic living."

Dianne Duncan and her husband plan to put the money into their grandchildrens' 529 college savings plans.

The Port Townsend, Wash., couple is retired and "fiscally conservative" with no credit card debt.

"It's almost unpatriotic not to go out and blow it," Duncan said. But her grandchildren's education is "what's important to me."

Others have told ABC News that they plan to buy a new TV or plan a trip to Hawaii for their 50th birthday celebration.

Retailers Take Notice

For those who do plan to spend their checks, there are plenty of retailers looking for the money and trying to entice shoppers in with specials.

Cincinnati-based grocery chain Kroger is giving gift cards with an added bonus to customers signing over their checks to Kroger. So a taxpayer with a $600 check would get a $660 gift card to use at the grocery store.

Sears, K-Mart and Lands' End -- all owned by Sears -- have an identical offer for customers who present their checks at the register. They can convert it into a gift card at the full value of the check and then receive a bonus gift card worth 10 percent of the check.

Wal-Mart, the world's largest retailer, is also planning some type of promotion but has yet to announce the details.

Supervalu, parent company of Albertsons, Jewel-Osco, Shop n' Save and other chains, will add $30 to a gift card for every $300 in rebate checks redeemed at its stores.

Granted, many of these purchases, like groceries, are items that many Americans need to buy anyway and it is unclear what benefit -- if any -- these checks will have on the overall economy.

But for now, many Americans are probably just wondering: When will I get my cash?