Across America, millions of parents received deposits into their bank accounts on July 15 thanks to the American Rescue Plan Act. This coronavirus relief bill provided an expanded Child Tax Credit.
Under the terms of the bill, families with income under a certain threshold will get $3,600 per child age 6 and under and $3,000 for each child between ages 6 and 17.
These payments will be delivered at a rate of $300 or $250 per child each month from July through December 2021, and the remaining money will be paid out when parents file their tax returns next year. Currently, the payments will only be provided for 2021, but Democrats are hoping to make this credit permanent.
This is a lot of extra money — particularly for families with several children. Parents will want to make the most of it — and personal finance expert Suze Orman has some suggestions to help do just that. Here’s what she advises.
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Use the money to cover needs
Orman advises that immediate needs always come first. This includes things like shelter and food.
While many people have benefited from rules prohibiting foreclosure or repossession during the pandemic, moratoriums on these legal actions will eventually end. So Orman urges parents to use the Child Tax Credit money to become current on these bills if they are behind.
Bulk up your emergency fund
For those without pressing needs, Orman suggests that saving for emergencies can be a good use of the Child Tax Credit. Emergencies are inevitable — especially for parents with kids — and Orman believes it’s important to have enough money set aside in savings to cover eight to 12 months of living expenses.
Saving your $250-$300 deposits from the Child Tax Credit (or more if you have multiple kids) could go a long way toward helping parents build up this important emergency fund.
Save more for retirement
Investing for retirement is important for parents, but it also benefits their children. After all, if parents are more financially secure, they may not rely as much on their offspring later in life — and they may be in a better position to help pay for college.
As a result, Orman suggests that contributing more to retirement could be a good idea for parents who are getting Child Tax Credit funds and who don’t need the money to cover urgent bills or to save for emergencies.
Get household help
Finally, Orman suggests that people who have struggled with the burdens of working and caring for kids during the pandemic may want to use the money to bring in some reinforcements.
“Moms burned out by the stay-at-home, educate-at-home demands of the pandemic,” says Orman on her website, “you are so approved to use payments to hire some help around the house or childcare outside the home as the world reopens — to give yourself some breathing room.”
Decide what the best use of the Child Tax Credit is for your family
While Orman suggests that these are good uses for the money, she ultimately makes it clear that it’s important to use the cash for your specific needs. She believes the payments are “a tremendous opportunity to work on your household’s security,” but she emphasizes that this “takes planning.”
So sit down, assess your family’s needs, and make a decision about how you can best put your Child Tax Credit to work for you.
View more information: https://www.fool.com/the-ascent/personal-finance/articles/heres-suze-ormans-advice-for-making-the-most-of-your-child-tax-credit/