The third of six monthly Child Tax Credit payments will hit Americans' bank accounts on September 15, and many parents already say they want the federal aid to last longer. Over 80% of people with young children in a new poll said they support extending it past 2021.
"It's not surprising that most parents with young children want the Child Tax Credit extended," says Erika Safran, a certified financial planner and principal at Safran Wealth Advisors. "It makes sense to support a program that directly benefits you and your family. Having cash on hand [if your] current income and assets are insufficient is what makes this program valuable."
So far, two payments worth up to $300 per child were sent to families as part of the American Rescue Plan that President Joe Biden signed into law in March. The first payment arrived July 15, and the second on August 13. The financial impact is notable: Americans' personal income jumped by 1.1% in July due to the Child Tax Credit, the White House's Council of Economic Advisors recently tweeted.
Just getting the first check last month was a "huge deal" for more than half of parents in a survey from ParentsTogether Action. And a majority of surveyed parents think stretching assistance beyond 2021 would strongly improve their mental health, boost their savings, and cut debt, according to MagnifyMoney.
It's "helping a lot of parents meet existing costs that they have on a month-to-month basis," Ashley Burnside, a policy analyst at the Center for Law and Social Policy, told CNBC. "Things like food, school supplies — really the essentials that help families meet their basic needs."
Indeed, when asked what they plan to spend their payments on, 45% of the MagnifyMoney respondents said groceries, while 44% cited school supplies. More than a third said they'll put the money toward savings (38%) or pay household bills (36%).
Experts say that's smart. Consider bolstering your emergency fund or putting money in a high-interest savings account after you've covered the essentials. Another sharp move could be paying down high-rate credit card or student debt if you have any, or investing more cash for retirement.
"Stimulus funds during the pandemic were predominantly used for day-to-day essentials and monthly bills, but once those were covered recipients were focused on building emergency savings and paying down debt," says Bankrate Chief Analyst Greg McBride. "Putting this money to similar use can help stabilize household finances both now and going forward."
Americans can expect to get four more monthly payments. The remaining are planned for September 15, October 15, November 15, and December 15. Those six will account for half of the full value of the tax credit, while the second portion will be applied when families file their taxes in 2021.
Video by Helen Zhao
The max you can get through Child Tax Credit for 2021 amounts to $3,600 per child under the age of 6, and $3,000 for those ages 6 to 17. Single filers with a modified adjusted gross income of less than $75,000, single parents filing as head of household earning below $112,500, and married couples filing jointly with less than $150,000 qualify for the full credit. Grow's calculator can tell you more specifically how much money your family may get.
Most families don't have to take any action to get the CTC payments: They will receive their payments through direct deposit, while others will be sent a check or debit card.
For now, the enhanced credit is only available for the 2021 tax year. But Biden's American Families Plan proposes keeping it through 2025. Senate Democrats voted on Wednesday to approve the framework of a $3.5 trillion spending plan, which would include funds for tax credit along with child care.
A number of Democratic lawmakers — including Sens. Michael Bennet (Colorado), Sherrod Brown (Ohio), and Cory Booker (New Jersey), and U.S. Representatives Rosa DeLauro (Connecticut), Suzan DelBene (Washington), and Ritchie Torres (New York) — have voiced support for permanently extending the aid.
"For many parents with young children who live paycheck to paycheck and have tight household budgets, the ability to get extra funds can be a lifeline," McBride says.
More from Grow:
- You may get about $300 per kid from the IRS August 13: Everything you need to know about the Child Tax Credit
- IRS sends first Child Tax Credit payments to over 35 million U.S. families: What you need to know
- Child Tax Credit calculator: Find out how much money you could get under the American Rescue Plan's new rules for 2021