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A family of 4 can get up to $5,600 with the third stimulus—what this family wealth advisor says to do with it

Consider these three categories when choosing how to spend your family's stimulus money.

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President Biden has signed the third — and largest — Covid-19 stimulus package aimed to bring additional relief to millions of Americans and their families.

The $1.9 trillion American Rescue Plan Act includes a variety of measures in addition to extending jobless benefits: another round of stimulus checks, expanded child tax credits, health insurance subsidies, restaurant aid and funding for vaccine distribution and school reopenings.

Most notable for American families who meet the income thresholds to receive a $1,400 stimulus check, the definition of a qualifying dependent has broadened to include both children and adults of any age who fit the legal criteria. Eligible families can receive $1,400 per dependent, so an average family of four (two parents and two dependents) could receive a total $5,600.

Here are the income limits for receiving a full $1,400 stimulus check:

  • Single taxpayers with an adjusted gross income below $75,000 (phases out completely at $80,000 or above)
  • Head of household taxpayers with adjusted gross income below $112,500 (phases out completely at $120,000 or above)
  • Married taxpayers filing jointly with adjusted gross income below $150,000 (phases out completely at $160,000 or above)

Unlike the first two economic impact payments issued in 2020 — $500 per dependent with the first one and $600 per dependent with the second — where dependents had to be 16 years of age or younger, the broadened qualifications for dependents allow for even more money into families' pockets. Think tank People's Policy Project approximates that 13.5 million more adult dependents will now count toward their households' earnings.

So, what do you do with over $5,000 of essentially "free" money?

David Wells, a certified family wealth advisor, suggests that any family eligible for stimulus money consider letting the windfall of cash sit in their bank account for 30 days before deciding.

"We tend to spend quickly money that we did not mentally budget receiving," Wells adds.

Below, CNBC Select spoke with Wells on his best strategies for how an average family of four should spend their $5,600 stimulus amount. Assuming the family is employed and can afford basic expenses (like food and housing), he suggests considering these three categories when choosing how to spend your family's stimulus money.

1. 'Ought to' category

Where should you spend any extra cash right now to set yourself up for financial success? If you carry a balance on your credit card, that debt is expensive due to double-digit interest rates. Perhaps you feel that is something that you ought to pay off.

"It's not fun, but the peace of mind it will bring by getting out of debt is something that will benefit you every month," Wells says.

Use your stimulus money to accelerate paying off your credit card debt

Transfer your outstanding credit card debt to a balance transfer credit card that offers an interest-free period that allows you to actually chip away at your balance. Depending on how much of a balance you have, you can use a portion of the $5,600 stimulus amount in increments over a series of months. A balance transfer card like the U.S. Bank Visa® Platinum Card offers no interest for the first 20 billing cycles on balance transfers and purchases (after, 15.24% - 25.24% variable APR; balances must be transferred within 60 days from account opening).

Another "ought to" category is an emergency fund. Wells adds that putting $1,000 to $2,000 of your $5,600 stimulus payment in a necessary rainy day fund can dramatically reduce your stress the next time unplanned expenses pop up.

2. 'Fun to' category

What would be fun to spend on? Direct a portion of your stimulus money toward something fun for the family to do. How large that portion should be depends on what you have left over after covering what you "ought to" spend on, like paying off your credit card debt or adding to your emergency fund. If you are free of credit card debt and already have a stable enough emergency fund, you can dedicate more of the $5,600 to something memorable for the family.

With vaccine distribution increasing, perhaps a summer family vacation is worth considering. "You could set a budget amount and let the kids help plan the event," Wells says. "Anticipation is half the fun, and then figure out a way to memorialize it after the fact, like making a photo book."

Start planning for your 'fun' spend

As we wait for winter to end, use this time to open a budgeting app. Most apps link to your bank accounts so you can designate where that stimulus money goes once it gets deposited.

Honeydue is a good option for spouses to budget and set goals together, plus it's free to use. Read more about the best budgeting app for couples.

3. 'A blessing to' category

With the past year being a financially tumultuous one for many, families may want to think about designating a portion of their $5,600 stimulus cash to give back.

Consider looking up a local food pantry or community organization near you that you can use your funds to help out. You can also make a charitable gift to a non-profit or private foundation of your family's choice.

"This will help the family focus on their own blessings, as well as receive the joy that comes from being able to help someone else out," Wells says.

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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.