Here’s what Americans are planning to do with the advanced child tax credit
A majority of Americans plan on putting their advanced child tax credits into savings rather than simply spending them.
That's according to a new survey from personal finance app Stash, which polled over 1,100 Americans, roughly 700 of whom were parents potentially eligible for the new credit.
Eligible families are set to receive half of the expanded 2021 child tax credit in the form of monthly payments of up to $250 per school-age child and up to $300 per child under 6 from July through December 2021. The other half will be paid out when they file their 2021 taxes. The credit is income-based and starts to phase out for individuals earning more than $75,000 a year or $150,000 for those married filing jointly.
About 57.5% of those surveyed by Stash say they're planning to save the child tax credit, while about 42.5% anticipate spending it.
"Ultimately, the goal for these payments should be to help alleviate money stress and get your family back on track, or better positioned to hit your long-term money goals," says Jeremy Quittner, editorial director and "resident money expert" at Stash.
Among those looking to save, about half plan to simply dump the funds in a standard savings account. Nearly 40% say they're specifically planning to invest the funds via a personal brokerage, custodial or retirement account.
"This further supports the trend we've seen this year with the surge in retail investing," Quittner says. People are keen to put their money to work and investing can be a smart way to do so, he adds.
For those who plan to spend the advanced credit payment, most families are prioritizing taking care of everyday expenses. The most common planned expenditure, according to the survey, is purchasing items for their children, followed by covering monthly bills and paying off debt.
"It's important to remember that many people — young and old — are still working to find their financial footing," Quittner says. Just this month, jobless claims rose after falling for six consecutive weeks, and 10 million Americans are still behind on rent payments, he noted.
For families who haven't yet decided how to use their advanced credit payments, Quittner recommends looking at the holistic financial picture. It's important to first ensure you're able to stay on top of bills or pay for weekly necessities. "These are critical foundations for overall financial wellness," he says.
Once you feel that you're in control over these short-term priorities, you can then move toward longer-term goals such as saving, paying down debt and starting to build wealth, Quittner says. Understanding how your finances can be a source of hope and motivation can be crucial for ensuring you're able to confidently tackle long-term savings goals, he says.
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