Valuable Ways To Spend Extra Child Tax Credit Payments
If you’re reading this, it’s likely you qualify for the new tax credit payments that they are sending out to parents starting July. These payments are meant as a relief to parents paying for childcare and should be spent however they are most beneficial to your family. I’ve been doing okay (not great) without them since I was able to work throughout the pandemic. But working (even though I was at home) meant that I was still paying for childcare and they never reduced the rate.
The nice thing about these payments is there is no repayment. They do not take away from your typical tax refund because the credit was increased for 2021. What they have basically done is pay divide the additional amount into 6 months. Find more information from the IRS here.
Since these checks will largely be additional, on top of what I’m already used to budgeting each month, I want to maximize their usefulness. What does that mean?
That means I want to use my checks for things that I know will come up outside my usual budget. It may seem like “just $300” but when you consider things you may not be able to afford to set money aside for otherwise, it can be a great help. For example, I want to buy Christmas gifts earlier, plan a birthday party for my son, pay my renters insurance for the year (saves at least $50 in installment fees), among other things. Keep reading for ideas to get the most out of your tax credit payments.
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Christmas in July
The end of the year can be a financially strenuous time for a lot of people. Most people are worried about Christmas but my entire family has birthdays near the end of the year, on top of Christmas and other holidays.
To ease that burden this year, I am buying my son’s Christmas gifts in July this year with my first tax credit payment. It will be hard not to want to open and play with these toys right away but I’d rather go into the holidays prepared.
This year I have a preschooler so gifts will be a combination between fun and learning, more specifically, STEM. I’ve researched some toys that are just fun with little educational purpose. Combined with toys that are designed to teach time, letter writing, math, problem solving, and more!
Check out my list of preschool toys here.
Annual Premiums
Each year I make one or two renters insurance payments before I realize it’s more beneficial to pay it off. It’s usually less than $200 so it isn’t too hard to budget for. However, this year money is tighter with the usual annual inflation but not much more income. This makes this a prime expense to use the tax credit payments for.
Paying in installments come with a $4 fee each month and I’d much rather save my $48 over the year if I can.
Car insurance is another thing you can use this money for but because that tends to be a little more pricey I wouldn’t pay that off unless you’re at the end of your premium with less than $300 left to pay.
Birthday
My son’s birthday happens to fall within a couple days of Christmas. You can imagine that is a financially strenuous time. Between buying gifts and finding an affordable thing to do in winter, it’s rough!
This year I plan to save for both gifts and party with these checks. He’s only had 1 real party when he was 1. At 2 we went to a skating rink but didn’t book a party. Three was sadly COVID so it was just the two of us. This year I want a nice party similar to his first birthday. This means cake, food, decorations, and fun. In other words, money, money, more money, and lots of money.
I’m currently compiling pricing information for everything and think I can stick to a $300 budget with the help of my parents with the cake. Therefore I only have to use one check for this expense. The gift budget is combined with Christmas shopping. This is because I buy everything at once and choose 1-2 presents to sit aside and wrap in birthday paper.
Emergency Fund
Whenever you receive extra money, it’s not a bad idea to throw those funds at your emergency fund. It can be tempting to use it for additional credit card payments. Just remember that having liquid funds for emergencies are just as important. This is because spending cash in those situations is better than going more in debt.
Only make additional credit card payments with this money if it will pay something off. Or if it will free up more money in your monthly budget which can be used towards long term saving. If neither of these is true, opt for saving your checks.
Childcare
My son goes to a fairly expensive daycare and that’s putting it modestly. So a $300 check can pay for a week of preschool for us. This is a great way to spend the funds as I usually struggle the last week of each month depending what day the first falls on and if it’s a pay week.
Considering this is what the payments were created for, this is a great way for working parents to spend the money.
Spend your tax credit payments how you need
Overall, these are great things to spend the money you will be receiving on. However, they’re meant as relief and should be spent on what’s most beneficial to your lifestyle. If the pandemic has had you struggling to pay rent, spend it on that. If you’ve had to reduce childcare because you just couldn’t afford it, spend it on that.
Everyone has unique circumstances and these are just a few ideas.
Save when you spend by trying Rakuten (formerly known as Ebates). You can shop at your favorite stores and earn better rewards than most credit cards offer. I wrote a post with all the details here.
