Last week I wrote about the new child tax credits, the changes that are coming, whether you should take them monthly or not, and more. You can check it out here if you missed it.
I wanted to follow up on that blog post with some ideas of how you can best use these additional dollars you will be receiving (if you are taking the payment monthly). Remember, this is all situational based on your family’s wants and needs, but I wanted to help give you some ideas of how you can use this money to benefit your overall financial plan.
Here are the 6 best ways you use the new child tax credit payments to your advantage!
1. Build Your Emergency Fund
If you don’t have 3-6 months’ worth of expenses built up in an emergency fund yet, you can use these extra dollars to help beef it up.
Emergency funds are so important to your overall financial wellbeing. Having a strong emergency fund helps you to not sell your investments or swipe a credit card when tough times occur. It also can help relieve anxiety around the what if’s when you know you have a plan and money set aside for when they happen.
2. Pay Off High-Interest Debt
Becoming debt-free (especially high-interest debt-free) can really strengthen your financial picture. If you have any high-interest debt, use this extra money to accelerate your debt payment process. Ultimately, when this is done, you will have more freedom in your budget since the monthly debt payments will no longer exist. Short-term discipline can lead to great long-term rewards.
3. Help Prepare for Your Children’s Future Educational Expenses
You could put this money into a 529 plan or a different vehicle to prepare for college for your kids. I mean you are getting this money because you have children, it could make sense to save it for them. But again… this all depends on your view on college and if you want to help pay for it or leave it to them (there is no right or wrong answer here). If you want help figuring out how to pay for college, I can help. Book the first meeting with me here.
4. Start an Investment Account For Your Kids
You could use the extra money to start an UTMA/UGMA account for your children if you don’t want to put it in a college fund (you never know what college will look like in the future or if your kids will go/receive a scholarship). This money could then get invested and be gifted to them when they turn 18 or 21, depending on the state. This could be a great way to set them up for the future. Just be aware this is granted to them at a certain age, so you want to make sure they will be prepared and use it wisely.
5. Prepare for Your Retirement
If you are behind on your retirement and have been pushing off investing for it, this could be a good time to put some extra money towards it. We all know starting sooner rather than later is so important so you can take advantage of compound interest, plus you will not be able to borrow your way to retirement. So use this to help make some contributions for your future self.
6. Use It To Make Some Great Memories With Your Family
If you feel like you are on track for all the things above, you could use this money to take your family on a vacation or do something cool that you may have not been able to do in a while. Life is not just about saving and building your finances, you also need to take time to enjoy your life and make memories with your kids that will last a lifetime. People rarely regret using their money this way.
The government doesn’t always look for ways to give back to parents, but they are with this new tax credit. Now it’s your job to use these extra dollars to benefit you and your family so you have a better tomorrow!
Disclaimer: Nothing on this blog should be considered advice, or recommendations. If you have questions pertaining your individual situation you should consult your financial advisor. For all of the disclaimers, please see my disclaimer page.