COVID-19, the CARES Act, and Families' Financial Security

In response to the economic shock induced by the COVID-19 pandemic, Congress passed the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act. Using household data on savings, income and expenses from the Survey of Consumer Finances, we show that cash assistance included in the CARES Act –namely, unemployment insurance benefit expansions and stimulus payments-- are instrumental in allowing almost all families to cover their recurring, non-discretionary expenses in the event of long-term unemployment. In the absence of such substantial government support, we document that nearly half of families who lose their income for six months would not be able to cover their expenses due to low levels of liquid savings and standard UI benefits that typically fall well below full replacement of income. Even though the increased UI payments expire after four months, because these benefits substantially exceed lost earnings for many workers, they have the potential to help households cover expenses well beyond four months by allowing otherwise paycheck-to-paycheck families to save.