I am thrilled that Child Tax Credits are starting to show up in people's bank accounts each month. I think it is a great opportunity for parents to save some money and do something they wouldn't be able to otherwise. However, I have heard of some people who may not know how best to spend their Child Tax Credit money wisely. Here are my tips for spending your Child tax credit responsibly and getting the most out of it!
Do not get me wrong, how you spend your money, is your business, and how I spend my money is mine. So I am not here to judge you at all, but you stumbled across my article because you are looking for ways to use the child tax credit in an educated way. Over the past few years, we have been working hard to fix our credit and build our savings since we purchased our home.
While I understand that the pandemic has really put a lot of people in a rough spot over the past 18 months, I hope that it also opened up some eyes to how quickly things can go the wrong way.
There are a few smart ways to use the advanced child tax credit that can end up bringing more money in the long run and benefit not only you but your child(s) future. After all, the goal that so many of us parents have is to ensure that our children's future is less of a struggle and filled with more positive experiences than what we may have gone through.
5 Best Ways to Use the Child Tax Credit Wisely
Invest in Your Child's Financial Future
A great way to spend some of your Child Tax Credit is by looking into opening a Roth IRA for your child. A Roth IRA can have an impact on their financial future even as young children and help them get off to the right start in life. The more money you put into it now, the bigger their account will grow over time.
Invest in Your Child's Education
Investing in your child's education is another great way to spend Child Tax Credit. This can come in the form of paying for college, private schooling, or even tutoring. You could use some Child Tax Credit money as an investment into buying them devices that will last for at least 3 years, especially if they are in high school.
This is something we have been discussing with our youngest son who is 16 now. We have talked about investing in a MacBook to last him the last 3 years of high school and hopefully into at least his first two years of college.
Pay Down Debt
You could use your child's tax credit money to pay down any debt. If you do not have a mortgage on your home, then this may be a little bit of tough love here from me! However, if you are constantly making minimum payments to your debt, then you need to stop wasting your money on minimum payments and put that extra cash towards the balance of what you owe. The more time it takes for you to pay off your debt, the longer interest is going to continue increasing this amount which will end up costing even more in long run.
Get Your Own Budget Worksheet + Bonus
Receive the customizable budget worksheet that I personally use to keep track of your expenses and savings.
You have Successfully Subscribed!
Put it in Savings
You should make sure to put your child's tax credit money towards something which will earn a lot of interest. For example, if you were to place the extra cash into a savings account it would be earning around 0.01% annually right now (which isn't much at all). So instead, why not earn a bit of interest from the child tax credit. You could try putting the money into a high yield savings account which will give you between 0.90% and as much as two percent of interest each year!
Spend It Wisely
The money that you receive from the child tax credit is very important and should be spent wisely. For example, if you were to spend it all at once on a new gaming device, your child may not learn that while, it's okay to have fun items, that there are necessities that need to be taken care of before the extras. You can use this as a learning experience and teach them how to save money or use it on necessities, like investing in their education, etc.
If you're considering using the advanced child tax credit to make more money in the long run, speak with your accountant or financial advisor. This strategy could end up benefiting not only you but also your children's future and help them have a better life than what we may have gone through – after all, that is our goal as parents!