Child tax credit improves savings for 33% of families, data shows - what to do if you're struggling
As lawmakers determine the future of child tax credit payments, new data reveals what the payments are being spent on. (iStock)
An extended child tax credit (CTC) provided by the federal government is giving families who meet certain income requirements $3,000 for each qualifying child ages six to 17, and $3,600 for children under six for the 2021 tax year. Half of this payment will be dispersed in monthly deposits, while the other half will come as part of the 2021 tax refunds.
As a result of these monthly payments, parents getting CTC funds were 33% more likely to add $100 to their savings, and 18% less likely to need to "significantly reduce their savings balances," in August 2021 compared to August 2020, according to new data from SaverLife.
"When we polled our members to find out how they were planning to spend the CTC payments, most of them said they were spending on day-to-day needs," the study states. "Our analysis of bank account data supports that. People are spending it on auto transportation, clothes, groceries and utilities."
If you're struggling to make payments and need more income, you could consider taking out a personal loan while interest rates are low to help you pay off expenses or reduce high interest debt. With Credible, you can compare personal loan rates from multiple lenders without affecting your credit score.
UNEMPLOYMENT BENEFITS EXPIRE IN SEPTEMBER: HERE'S HOW YOU CAN SAVE MONEY NOW
Low-income families use CTC cash to catch up
Parents spend more money in every major spending category than non-parents do, according to the study. This trend became more pronounced in July and August as low-income families used the extra CTC cash to play catch up on their expenses.
But the purchases being made are temporary. When surveyed, 89% of recipients said they know the monthly child tax credit payments end next year and they're spending accordingly.
However, survey respondents also said that if the credit were made permanent, they would find it easier to cope with day-to-day expenses and would take steps to pay for long-term costs such as tutoring for their children, moving to a better home and starting a college fund.
If you need more help to cover your day-to-day expenses or want to reduce other high-interest debt, you could take out a personal loan while interest rates hover near all-time lows. Visit Credible to find your personalized rate and see how much you could save.
FED CHAIR POWELL SAYS INFLATION SURGE WILL BE TEMPORARY: HERE'S WHAT IT MEANS FOR INTEREST RATES
Steps to take if you're struggling financially
The CTC is available to parents who make up to $150,000 as a married couple or $112,000 for those filing as a head of household. Eligible families receive up to $300 in monthly child tax credits per child under the age of six, or $250 in advanced monthly payments for each child ages six to 17. This is the largest child tax credit ever offered, according to the White House.
"The new Child Tax Credit enacted in the American Rescue Plan is only for 2021," the White House said in a statement. "That is why President Biden strongly believes that we should extend the new Child Tax Credit for years and years to come. That’s what he proposes in his American Families Plan."
But for now, here are a few steps to consider if you are struggling financially:
Ensure your information is up to date
Using the IRS’ Advance Child Tax Credit Payments in 2021 portal, Americans can:
- Check if they are enrolled for payments
- Unenroll from payments
- Update their bank account and mailing address
- View their payments
But in the coming weeks, users will also be able to use the portal to update their 2021 circumstances that would change their payment amounts, such as the birth of a new baby. Currently, there is no date for when this will be available, and previous guidance said it would be available in late summer.
Non-filers should submit their information
If you do not file taxes but think you may qualify for child tax credit payments in 2021, you will need to submit your information to the IRS. This is because the IRS is getting their information for the tax credit advance payments from the 2019 and 2020 tax returns, depending on what data was available when they began issuing the payments.
Apply for a personal loan
If you don’t qualify for additional child tax credit payments, or if you do but still need additional financial help, consider applying for a personal loan. Due to today’s low interest rates, Americans can apply for a personal loan and consolidate other high-interest debt to save money. Contact Credible to speak to a personal loan expert and get all of your questions answered.
Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.