How are you going to spend your July 15 child tax credit money? We have ideas

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

Sarah Tew / CNET

If you are a eligible parent, you have probably received your first payment of the child tax credit July 15 via direct deposit – or he is on his way by post. These payments will continue to arrive monthly until December, with the remainder coming in 2022 for a total of up to $ 3,600 per child. Do you have a plan for spending this money?

You may need to use the money for daily expenses, like diapers, groceries, and utility bills. Or maybe you want to save it to help your household build a safety net 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 new IRS portals who can help parents see if they are eligible, refuse advance payments and update their personal data. We recently updated this story with new information.

Create a plan on how to use monthly child tax credit checks

The first child tax credit check was mailed out on July 15, so if you haven’t spent it yet, you can make a plan for what to do with the money. If you’ve spent it, start thinking about August through December payments. Start by making sure you’re getting the right amount with CNET Child Tax Credit Calculator.

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 big expense in 2022 (like a car or school fees). To unsubscribe, you will need to use the Child Tax Credit Update Portal to unsubscribe – do it before August 2 to stop payments.

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 pay for 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.

Make payments on your “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

Create an emergency “rainy day” 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 significant 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.

What if you spent on things that 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 not to use it on a large TV or to throw a party, for example, until you have achieved 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 unemployment 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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