More than 35 million families received a child tax credit (CTC) on July 15 as part of the American Rescue Plan. The credit covers 88% of children in the United States. If you're a nurse with children under the age of 17 and received a CTC, you may be thinking, "What should I do with the money?"
Before we get into some ideas, let's explain some key facts about the most significant child tax credit given in history and how much you will receive:
- Married couples with children making up to $150,000 are eligible
- Families with a single parent or guardian making up to $112,500 are eligible
- Families with a child under the age of six will receive $3,000 total per child or $300 per month
- Families with children between the age of 6-17 will receive $3,600 total per child or $250 per month
Keep reading to learn what the CTC is, how and when it will be distributed, how to opt for one large payment, and some resourceful ideas on what to do with the money.
What is the Child Tax Credit?
The CTC is part of the American Rescue Plan Act, which increased the credit by $1,600 for children under the age of six and $1,000 for children ages of 6-17. Typically, families receive the credit after they file their taxes the following year. This year, the expansion costs about $100 billion.
The reason you received the CTC is that you are part of the millions of working-class families raising children. The CTC is also increased to help low-income families raise children, cutting child poverty by more than half.
You should receive your credit in your bank account, a check, or a debit card in the mail.
President Biden would like the CTC to extend for years to come, proposed in his Americans Families Plan, but only time will tell.
The installments are scheduled for the next six months. Families will then receive the rest after filing their 2021 income tax return.
Can I Opt-out and Receive One Large Payment?
You can unenroll in the monthly payments and decide to receive one large amount next year. Families may want to do this if they're going to:
- Pay off a large debt
- Buy a large purchase or save for a down payment on a home
- Wait to file their taxes just in case they receive an overpayment due to a higher income bracket or if a dependent ages out before the end of the year
Dr. Jenna Liphart Rhoads is a nurse educator, freelance author, and editor. When asked which option she believes would be best, she said, "I think it completely depends on the needs of the individual. Some people may risk spending the extra money on something unnecessary and would benefit from collecting monthly payments. Some may benefit from collecting the full amount to be able to pay off a loan faster and therefore save money by saving on interest."
If you are considering opting for a single lump sum, you only have until August 2 make your request. You can manage your advance payments here.
Top 6 Ways Nurses Can Spend or Invest Their Child Tax Credit
You may be thinking, "When do I have the time in my hectic nursing schedule to figure out what to do with the money?" Don't worry; we have you covered. First, set a goal and figure out what is the best plan for your family. Then, we will take it from there. Here are six suggestions on making that plan work for you.
1. Pay Off Student Loan Debt or Credit Card Debt
You can either use all the money or just a small amount to pay off student loan debt or credit card debt. Start with the debt with the highest interest rate. Call your bank or student loan provider to find the highest APR or annual percentage rate on your debt.
Then, tackle the one with the highest APR first. If your CTC helps rid you of all or some of your debt, great! The National Foundation for Credit Counseling (NFCC) is a nonprofit credit counseling agency that can also help you achieve your financial goals.
2. Open a 529 College Fund
You have a busy nursing schedule. Maybe you've been putting off saving for your child's college education. Now is the best time to open a 529 College Fund.
A 529 college fund is an investment account. It has many benefits like:
- Tax advantages that allow you to withdraw money for educational purposes without paying federal and state income tax (in most states).
- It's a very "hands-off" investment plan — deposit a certain amount and watch it gain interest — perfect for your busy schedule.
- Plans offer age-based investments.
Put a portion or all of your CTC into the fund. Find out what works best for you and your family. For more information on 529 plans, you can check out the 529 Savings Plan Network created by The National Association of State Treasurers.
When asked about ways she is saving for her childrens' future, Rhoads said, "Both of our children have "fully funded" college savings accounts (529 plans), and we have an investment brokerage account that we allocate money to to pay for things not covered by the 529 plans such as room and board, apartment rent, and studying abroad fees."
3. Open a High-Yield Savings Plan
A high-yield savings account can be used as an emergency fund account or savings account. It's an account that gains interest with time, letting you reach your savings goals quicker. You can also withdraw from the account if you need cash fast. By law, you can withdraw or transfer cash out of a high-yield savings account an unlimited number of times.
Saving your CTC in a traditional savings account may only pay 0.06% annual percentage yield (APY) according to Bankrate. Start researching some high-yield savings accounts on your lunch break. You can find a list here.
4. Invest in an Index Fund
Investing in an index fund is another option for you and your family to save. An index fund is a type of mutual fund or an exchange traded fund (ETF). It follows popular indexes in the stock market, such as the Dow Jones, Nasdaq, and S&P 500.
Index funds are a great option for nurses who are nervous to actively invest in the stock market. Other benefits include:
- Low fees
- Tax advantages
- Low risk
- Passive investing
- High long-term returns
5. Attend a Conference
Conferences are expensive and many facilities do not cover the entire bill. Is there a conference you've been dying to go to, but it is not in your budget? With your CTC, now is the time to go.
Maybe even opt out of the monthly payments and receive a lump sum at the end of the year so you can pay for the conference and airfare in full. Remember to opt out before August 2.
If you don't have a specific conference in mind, consider searching for upcoming conferences by destination. You may be able to visit an exciting destination, such as Hawaii or Rome. Coordinate with some nurse friends and go together. Remember to request your PTO as soon as you find a conference.
6. Spend It, Wisely
Whether you've been wanting to fix your house, save up for one, plan a vacation, or buy a car, your CTC is a nice amount of extra cash you may not have budgeted for your family. Treat yourself because you deserve it, especially being a frontline worker during the COVID-19 pandemic.
Experts say, don't use your CTC on frivolous things like throwing a huge party or going on a shopping spree. Pay off high interest debt first, and then use a portion of the money to go out to dinner at your favorite restaurant or buy school clothes and/or school supplies for the kids. If you have a newborn or toddler, buy necessities like diapers, wipes, and/or baby formula or food.
Building a Better Financial Future
Having your financial house in order reduces anxiety and allows you to have more control over your finances. You'll feel relieved, when years from now, your child is thinking about their educational future, and you've taken the time to save and invest for them.
"Most parents want to help their children "get a leg up" in life and as young adults; saving for your child/children's financial future is an underrated way of doing so," says Rhoads. "There are so many options out there to easily help parents save money for their children."
Since financial literacy isn't taught in nursing school, you can continue to improve your financial goals by researching other high-interest educational savings accounts, or talk to a financial advisor. If you haven't paid attention to your finances, your CTC is giving you an unexpected nudge. Start paying attention, and plan for your financial future today.
- Guide to Financial Aid Scholarships for Nurses
- Student Loan Forgiveness for Nurses
- Budgeting for Nursing School
- Why Is Nursing School So Expensive?
Meet Our Contributors
Dr. Jenna Liphart Rhoads is a nurse educator, freelance author, and editor. She earned a BSN from Saint Francis Medical Center College of Nursing and an MS in nursing education from Northern Illinois University. Jenna earned a Ph.D. in education with a concentration in nursing education from Capella University where she researched the moderation effects of emotional intelligence on the relationship of stress and GPA in military veteran nursing students. Her clinical background includes surgical/trauma adult critical care, interventional radiology procedures, and conscious sedation in adult and pediatric populations. She currently resides in Wisconsin with her husband and two children.
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