5 ways to get the most out of the child tax credit
As a parent, you know life comes to you quickly and you are probably making about 35,000 decisions per day (the average number of decisions an adult is estimated to make in a 24 hour period). When you first heard that the Biden administration was planning to deposit extra funds into your bank account each month as part of an advance on the Expanded Child Tax Credit, you probably spent a good chunk of those 35,000 decisions trying to decide how best to use the money. If you think about it again, here are five options worthy of attention.
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If the drama of the past year and a half has left you in a financial bind, it takes a toll on your whole family. And, if you’re struggling to pay your bills and worry about bill collectors, there’s no shame in using the Monthly Child Tax Credit to cover your obligations, put food on the table. table and keep a roof over your family’s heads. When it comes to extra cash, the smartest choice is always to meet immediate needs. Once you’ve settled the most urgent expenses, you can think about what you want to do next.
2. Pay off the debt
Debt is dangerous for several reasons. Compound interest on debt can take you years to pay off with nothing new to show. And being deeply in debt can keep you awake at night, looking for ways to dig yourself up.
First of all. No matter how much debt you are in right now, it is possible to free yourself from your debt. It all starts with a plan and the belief that you can do it. No matter how many dependent children you have or how much you receive each month from the Advanced Child Tax Credit, these additional funds can make it easier and faster to pay off your old debts.
While the advanced child tax credit was originally scheduled to expire at the end of this year, the Biden administration is working to extend it until at least 2025. Think about it. This would give you at least three years of additional funds to use to get rid of your debt.
Imagine that you owe $ 10,000 on a credit card with an interest rate of 17% and you pay a fixed amount of $ 300 per month to pay off the debt. At this rate, it will take 46 months to pay off the $ 10,000 in full, and you will pay an additional $ 3,630 in interest.
Let’s say you receive $ 500 per month in child tax credits and use $ 250 to pay your monthly bills. That would leave you $ 250 to pay off the credit card faster. Adding the $ 250 to the $ 300 you are already paying will increase your monthly payment to $ 550. In doing so, the debt would be paid in full in 22 months (instead of 46), and you would pay a total of $ 1,645 in interest, a savings of $ 1,985.
3. Make repairs
Anyone of us who’s ever struggled to make ends meet knows how easy it is to put repairs on the back burner. Whether it’s your car or home in need of repair, postponing maintenance can be costly. Suddenly a small problem with your car’s engine becomes a big and expensive problem to fix.
Take a look around and decide if there are any small issues that need to be addressed. If you’re not a handyman, use some of the child tax credit money to pay a professional to do repairs. The cheapest way to fix maintenance problems of all kinds is to fix them before they have a chance to get more serious.
4. Plan for less common expenses
Let’s say one of your kids goes to soccer camp every summer and another desperately wants swimming lessons. Pay part of the child tax credit into a savings account specifically set aside for irregular spending.
Likewise, if you have annual HOA fees, insurance payments, or club dues, the funds you set aside today can keep your budget from taking a hit when the bill comes due. And while no one needs to remind you, the holidays are approaching. If you don’t have any other plans for the money, you have the option of slowly making the purchases you normally would, without dipping into the family budget.
5. Create a budget – with your kids
Why not allow your kids to help you budget that includes the child tax credit? This can accomplish three things:
- With a little preparation on your part, including them in the conversation can teach your kids about personal finance. This understands the importance of planning, saving and investing.
- This can give your children the confidence to learn more on their own and to develop good financial habits as adults.
- It may well protect your children from abuse. According to the Pennsylvania Coalition Against Domestic Violence, financial abuse occurs in 98% of abusive relationships. This is the main reason victims stay in an abusive relationship or come back after leaving it. By taking the time to teach your kids about money, including how to earn enough to be financially independent, you might just be giving them the tools they need to get out of an unhealthy relationship when they’re older.
It may sound dramatic, but here is the truth, according to the National Coalition Against Domestic Violence: More than 10 million women and men are physically abused in the United States each year.
Providing your child with tools that will allow him to fend for himself is a powerful gift. If you don’t know where to start, visit this page on teaching girls money. You can also use this page to teach your kids the right financial lessons. You are likely to find tips and ideas that make learning money fun.
It is rare in life to receive money that you did not expect. Ideally, you will put these “found” funds to work for you and your family.