The pandemic has forced the federal government’s hand on more than one occasion.
In March 2021, parents got a big reprieve from President Joe Biden when he signed the American Rescue Plan Act of 2021 into law. This act propelled funding for several relief programs.
One of the programs was the Child Tax Credit, which was designed to help families get advance payments starting in July 2021.
Half of the total credit amount is being paid in advance monthly payments. You can see the full payment schedule below from the federal government.
Under the expanded credit, parents will receive up to $3,600 per eligible child in monthly installments through the rest of 2021, and the other half after filing with the IRS in 2022.
The credit is designed to help parents cover the costs of raising their children, but there are no restrictions on what individual families may do with the money.
It’s important to note that not every family qualifies for the Child Tax Credit. Through the American Rescue Plan, the Child Tax Credit will phase out with adjusted gross incomes of $75,000 for single filers, $112,500 for head-of-household and $150,000 for joint filers.
To find out if your family is eligible, visit the IRS website.
Note: Graphic courtesy of the Internal Revenue Service.
Using Funds In New Account
If you’re thinking about opening a new account with this money, it’s important to find an institution that has simple, easy-to-understand offerings.
Building an emergency fund is a nice first step in ensuring your family’s financial stability. A reserve account gives you security in knowing you’re prepared for whatever the future has in store, such as an unexpected expense or income loss.
What you decide to do with your Child Tax Credit income is obviously your choice. If you and your spouse are earning regular paychecks during the pandemic, this money can be saved to reach your long- and short-term goals.
Other uses for your Child Tax Credit could include:
- Paying off high-interest debts – if you have credit card interest weighing you down, using the money for this is a wise choice.
- Saving for college – if you want your child to benefit from this money in the future, starting a savings account, or CD, for their education is a great way to start saving for tuition.
- Family vacations – if your family has always wanted to go on a vacation together, but could never afford it, the time to save is now.
- Investments – If you have your emergency fund and other areas covered, putting the money into a retirement fund for yourself can be a great long-term move for everyone.
Tips For Online Banking
With online or mobile banking, you can easily move money from one account to another. Stearns Bank offers this feature via our StearnsConnect online banking platform.
Think about it: if you have two children and bring in $550 per month from the Child Tax Credit, you can transfer these funds and have $3,300 in your new dedicated savings account in six months.