Child tax credit money: plan now how to use the payments when they arrive
From July, you could receiveas a member of which is part of march package. Normally, you get the tax credit back after you file your but with President Joe Biden’s March stimulus bill, this year you will receive money in a series of payments until the end of 2021 and until 2022, . In total, you could receive up to , . This child credit is in addition to payments included in the American Rescue Plan, such as the . The question is: what do you do with the money?
These payments can be an opportunity to secure your financial home to make sure your family – including your children – is on a better footing. To help you consider the different ways you can use these payments, we spoke with financial experts and credit counselors for their recommendations on how to use that money, meeting urgent needs and paying back the debt. debt to the constitution of an emergency fund. This extension of the child tax credit is part of a larger, multibillion-dollar effort by President Joe Biden’s administration to pull the country out of the pandemic and put individuals and families on a better economic footing. This child tax credit is a key part of Biden’s plan to put money in the pockets of families who need it most.
Of course, the money is free and you can use it however you want. But if you’re looking for ideas on how to put payments to good use, we’ve got some suggestions. For more ways to save or get cash this year, here’s what’s up with, how to see and how the March stimulus bill can help you .
First, plan how you will use your child tax credit
Your first child tax credit check may not arrive for weeks, probably not until July, so you have time tofor what you’re going to make money before it happens. You can figure out what to expect (overall and by month) using CNET’s Child Tax Credit Calculator by providing a few details: how many children you have, your income, and your filing status.
Next, think about your financial goals for the use of the money. âThe most important thing is to start planning now,â Emily Shallal, senior director of client strategy and innovation at Ally Bank, told CNET. “You don’t want to look back on that money with regret and wonder what happened.”
Here are some of the ways you might plan to use the money.
Meet your family’s basic needs
Cover your family’s urgent needs first, including your children: budget for groceries, shelter, utilities, and essential supplies such as medicine. You could use some of the money for needed auto repair or postponed medical or dental work.
Pay off your ‘toxic’ debt, including credit cards
Once you have covered the necessities, depending on your situation, it may be a good idea to take care of your . “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 number one priority,” Bruce McClary, senior vice president of communications at the National Foundation for credit counseling, told CNET. Clary said “toxic debt” includes high interest unsecured debt, such as credit cards and low value loans, as well as debts that have been collected and may become a bigger issue for you later. .
Create an emergency fund
Then you might want to create a fund for rainy days.
If you meet other needs, you may want to put some of the money from the checks into Credit Union National Association, a rainy day fund can reduce a family’s stress because you know when you’re faced with an emergency, such as a car breakdown. , you will have the costs covered.to create a financial cushion. According to Mike Schenk, deputy director of advocacy for policy analysis and chief economist at the
While the rule of thumb is to have 3-6 months of savings in an emergency fund, this amount may not be practical for some. Schenk told CNET that he recommends that you start with a more modest goal – say, $ 1,000 – and work your way up to a larger buffer.
Budget for the future
You can also choose to devote some of the money to your savings to achieve a longer-term goal – for a, for example, a to help pay for college or trade and vocational school, or to develop your .
Get help developing a savings or debt reduction plan
If creating a debt reduction plan or savings plan seems daunting, you can get affordable (or maybe free) help from
A nonprofit credit counseling agency such as the 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 those who live below the poverty line, the agency can waive these fees.
You can also work with a financial advisor to create a plan to use the child tax credit money and to set goals. Schenk said that as a member of a credit union, you can work with an advisor to create a plan tailored to your specific situation. Other financial institutions such as banks may also offer financial advice as a service.
How about spending it on things that you want to instead of things you need?
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 advised not to use it on a big screen TV, for example, or to throw a party, until you’ve hit the other items you’ve outlined in your plan. âYou may find yourself in a time where you really need the money and just have a bunch of impulse buys,â Clary said.
For more ways to save money, you paid employment insurance, how the next , and how you could .