Hey, parents! How will you use your July 15 child tax credit money?

The extra money paid up front this year can help families with basic needs.

Sarah Tew / CNET

Starting next month, over 36 million U.S. households will automatically receive their first down payment of 2021 child tax credit. In years past, parents would have received the credit much later, when they filed their income tax return the following year. Now, eligible families will receive the money in advance payments until the second half of 2021, amounting to $ 3,000 or $ 3,600 per child by 2022. All working families will get full credit if they earn less than $ 150,000 for a couple or $ 112,500 for a single-parent family (the amount gradually decreases for higher incomes).

The question is, what’s the best way to use this money for your family? Some will need cash for daily expenses, like diapers, groceries, and utility bills. Others may want to save it to help their households build a stronger foundation for the future. We spoke with financial experts and credit counselors for their recommendations on how to spend and save that money, from meeting urgent needs and paying down debt to building an emergency fund.

Low-income families with children are also eligible for this crucial relief, including those who do not earn enough money to file tax returns. And if you have multiple dependents, there’s no cap on the total amount of credit you can claim. To learn more about the child tax credit, here is what you need to know about the upcoming IRS portals this will help parents see if they are eligible, opt out of advance payments, and update their personal information. We recently updated this story with new information.

Make a plan for using monthly child tax credit checks

The first child tax credit check takes place on July 15, so now you have the time to make a plan for what to do with the money before it arrives. For starters, you can figure out how much you can expect (overall and per month) using CNET. child tax credit calculator by providing some details: how many children you have, your income and your filing status.

If you don’t want the partial checks early, but would rather have full payment next year during tax season in 2022, you’ll need to opt out of the monthly payment plan. There are many reasons you might want to opt out, as if you are planning a large expense like a car or school fees. To opt out, you will need to use the Child Tax Credit Update Portal, which will be available before the end of June.

Next, think about your financial goals for the use of the money. “The most important thing is to start planning now,” Emily Shallal, senior director of customer strategy and innovation at Allied bank, told CNET. “You don’t want to look back on that money with regret and wonder what happened.”

Use payments to meet your family’s basic needs

Cover your family’s urgent needs first – including those of your children – by budgeting for groceries, housing, utilities, and essential supplies such as medicine. You could use some of the money for a needed car repair or a postponed medical or dental procedure for a family member.

Pay off “toxic” debt, including credit card debt

Once you have covered the needs, it may be a good idea to take charge of your most expensive debt. “If you’re in a situation where you have a lot of what I would call ‘toxic debt’, paying off those balances should be your # 1 priority,” Bruce McClary, senior vice president of communications at the National Foundation for Credit Counseling, told CNET. “Toxic debt” includes high interest unsecured debt such as credit cards, small loans, and debts that have been collected (which could become a bigger problem later).


You can use the child tax credit money to pay off some of your toxic debt.

Sarah Tew / CNET

Start a rainy day emergency fund

If you are meeting other needs, you may want to put some of the money from the checks into an emergency fund to create a financial cushion. According to Mike Schenk, deputy head of advocacy for policy analysis and chief economist at the National Association of Credit Unions, a fund for rainy days can reduce stress in a family. Such a fund means that when you face an emergency, like a breakdown in your car or a huge hospital bill, you might have the expenses already covered.

While the rule of thumb is to have three to six months of savings in an emergency fund, this amount can be impractical for some. Schenk told CNET that he recommends you start with a smaller goal – say $ 1,000 – and work your way up to a bigger buffer.

Budget for a big future expense

You can also choose to put some of the money into your savings to achieve a longer-term goal – for a down payment on a house, for example, a 529 account to help pay for college or trade and vocational school, or to build your retirement account. If you think that getting the monthly checks is too tempting to spend right away, you might consider getting a big amount for the Child Tax Credit in Spring 2022. That way you can then put in a big amount. next to.

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Ask for help in setting up a debt or savings plan

If creating a debt reduction plan or savings plan seems daunting, you can get affordable (or even free) help from a debt advisor or financial advisor.

A nonprofit credit counseling agency such as National Foundation for Credit Counseling can help you manage your debt, whether it’s credit cards, a mortgage, or student loans. And the agency can work with your creditors to set up reduced payment agreements, and then help you manage your payments on those accounts. In most cases, an initial debt counseling session is free, said Clary, where you can meet with a debt counselor to review your situation and get specific recommendations. If you decide to work with an advisor to manage payments to your creditors, the agency may charge $ 25 to $ 35 per month to manage your plan. For people below the poverty line, the agency can waive these fees.

You can also work with a financial advisor to create a plan on how to use the child tax credit money and to set goals. Schenk said that member of a credit union, you can work with an advisor to create a plan for your specific situation. Other financial institutions such as banks may also offer financial advice as a service.

Spend on things you want to? Perhaps

The counselors said you could set aside some of the money for something special for you and your family. Take your family to dinner, for example. But they advise against using it on a large TV or having a party, for example, until you’ve hit the other items outlined in your plan. “You may find yourself in a time when you really need the money and just have a bunch of impulse buys,” Clary said.

For more ways to save money, the IRS may owe you money for taxes you paid on employment insurance 2020, how the next stimulus plan could be useful to you, and how you could $ 50,000 back with unique COVID-19 credits.

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