How 42 Families Plan To Spend The Child Tax Credit

While many Americans welcome the news of another $1,400 per person stimulus check via President Biden’s recently passed American Rescue Plan, another aspect of this legislation may have an even more powerful impact on families: expansion of the child tax credit. But what does the child tax credit mean? And what are people saying about direct payments?

It’s easy to be confused. The bill is nearly 600 pages long and covers $1.9 trillion dollars of recovery spending. This includes not only the oft-mentioned $1,400 stimulus, but also funding for school re-openings, small business aid, vaccination efforts, and the expansion of SNAP benefits among, literally, 591 pages of additional initiatives. The child tax credit aspect of the bill goes (basically) like this: if you are a single parent making under $75,000 or part of a married couple with a combined income under $150,000, the tax credit you will get for each child is going from $2,000 per child a year to $3,000 for children between the ages of 6 and 17, and $3,600 for children under the age of six.

The most striking change, however, is that half of that credit has been directed to be sent to families as direct payments from July to December. (According to reporting from CNN, President Biden, along with Congressional Democrats and even some Republicans, have suggested they would like this component to become permanent.) In short, should the Treasury Department choose to make these monthly payments, the average family of four could receive between $500 and $600 per month for the latter half of 2021. According to analysis by Columbia University’s Center on Poverty and Social Policy, it is a move that is expected to reduce childhood poverty by a staggering 40%.

But where will this money go? I asked parents “What would you do with an extra $550 a month?” and received 120 responses. Though this is certainly an informal poll, it nevertheless provided an interesting snapshot of where many families are a year into the COVID-19 pandemic. For most, there was no one answer — the costs of raising a family were myriad and interconnected. However, there were some common themes.

Here’s how they would spend their tax credit money, in their own words

Child Care

Paying for child care — day care, before/after-school care, babysitters, and nannies — was specifically mentioned in approximately 17% of responses to this question. In several cases, the ability to afford childcare was the difference between a parent (usually a mom) heading back into the workforce.

• “I’d like to say college fund, but in reality, it would subsidize day care, which is astronomical here.” — Megan S., Washington
• “It would go straight to day care! Child care a week for my two kids is $475, so this is a huge break!” — Beth B., New Jersey
• “Babysitting — for date nights and doctor appointments and just to get caught up on household tasks. And childcare would also help me expand my business and work more hours — currently I work nights and weekends.” — Jenni P., Wisconsin
• “Daycare for my youngest so I can go back to work full time. I have never been able to work without relying on family to watch the kids and when [my husband] died three years ago, I had to stop working all together and move in with my dad because I couldn't make enough money to cover childcare costs. I love my kids and the fact that I can be with them, but I want to be able to support them as well.” — Breanna A., North Carolina
• “I would put the money towards child care, but that's because COVID shook our carefully balanced care plan and continues to threaten to topple it daily. My son was supposed to go to on-site care before school, but that would have mixed him with more children. He was showing signs of distress about returning to school, so we kept our familiar ‘morning’ nanny instead and she drives him in. Soon she became our ‘all-the-time’ nanny, because his school and the one I teach at have an uncanny ability to never overlap their quarantines or vacations. In the past, we would have sent him to Nature School as a drop-in student for a small daily fee. This year they do not accept outside students dropping in. All in all, we pay increased fees for school, higher pay for the nanny, and still my husband and I miss work regularly to cover the gaps. Many of my teaching colleagues quit this year because of child care issues, so I do thank my lucky stars we have stable income to make it happen.” — Rita G., Connecticut

Extracurricular Activities & Fun

In about 10% of cases, families said these funds would allow for the “extras,” like summer camp, music lessons, vacation, or other “splurges” that would normally not be in the family budget, but that they believe contribute to the overall enrichment and well-being of their kids. Many of those who cited “fun,” however, admit that it will have to wait until more pressing financial concerns are taken care of, but admit that a monthly check would bring them to that goal much faster.

• “We are savers, but I will say the nature of this bill is to stimulate the economy, so we have just used prior checks to justify a home splurge or even a takeout dinner. We have been lucky enough to not lose income, so I think it is important to be patrons to struggling businesses. For example, normally, I make my own coffee, but I'll make a point to patronize our little hometown coffee shop because they are struggling.” — Lindsay B., Georgia
• “Summer camp, and a vacation we really can't afford to take.” — Gerren W., Pennsylvania
• “I've never been able to afford summer camp programs for my kids, and this money is going to be used to give them each a few weeks of that experience.” — Tara E., Connecticut
• “What I'd eventually love to put it towards: extra enrichment activities for my kids: a museum membership, piano/guitar lessons, camps, art supplies. Things that, due to husband's pandemic job loss, we eliminated or never were able to afford previously.” —Jessica S., New Mexico
• “A camping trip for my daughter’s 9th birthday. She’s been asking to go for years and we’ve never been able to afford all the things we’d need or a campsite.” — Bethany W., Louisiana
• “All I’ve ever wanted is to throw my kids a big giant birthday party. An inflatable house, a cake with their favorite characters, some cool gift like a brand new bike — I’ve always been able to give them a small party, but I can’t wait to use this to really shower them with those expensive number balloons and Paw Patrol wrapping paper instead of the stuff I can just pull together.” — Sarah F., Georgia
• “We’re going to buy a bunch of summer toys we usually can’t afford, like those big sprinklers and swimming pools. We’re going to save a couple of the months so we can get a trampoline at Christmas, too.” — Holly L., Georgia
• “Bikes for the whole family.” — Jessica P., Alabama

Home Repairs

Whether necessary structural repairs, efficiency improvements, or simply upgrades, more than 15% of respondents included home repairs to improve their family’s quality of life in their plans for a monthly payment.

• “We’re a family of seven, so this is big. Our home was built in 1856 and needs several upgrades beyond my scope of expertise to bring it into the 21st century — upgrading the electrical system — mostly knob and tube still — plumbing, replacing the oil boiler to one that burns pellets, hiring a contractor to help remove lead paint, etc. The twins need a better bedroom space, so we’ll have their room remodeled sooner rather than later, too.” — Jessica L., Maryland
• “[The money] would probably go to literally keeping a roof over the kids' — and our — heads. We desperately need a new roof on our house and the cost of plywood has gone through the roof during the pandemic, so it's way more expensive than it would have been a year ago.” — Angelique B., Pennsylvania
• “We are in the process of fixing up a house we bought. This will give my kids a first shot ever at having their own rooms and a place for us to be a family and not live at my moms anymore. Unfortunately the money would go there for now and then once we are in we will be putting money aside for the kids. But right now, that money is helping us as a family still continue on the path to our goal. That goal is finish our home so the kids can have a space of their own to call home” — Meaghan M., New Hampshire

Medical Expenses

Medical expenses were a concern for a handful of respondents, from therapies to outstanding medical bills.

• “It would be nice to have extra money for a therapist.” — Robin R., New Jersey
• “This new benefit is coming at a great time for us because we were just told by our pediatrician that our toddler needs speech and occupational therapy and our insurance only pays for 20 visits a year. That means after a couple of months we are going to have to be paying out of pocket. So right about the time we start getting this in July, we will probably need it to pay for those visits.” — Dan F., Georgia
• “My daughter’s applied behavior analysis therapy. My portion of the deductible is $480 out of pocket each month.” — Randi L., California
• “Orthodontia. I can't wait to tell our 7-year-old son about how the stimulus plan helped create space for his teeth that no one saw due to the masks he had to wear.” — Cristina R., Connecticut

Bills & Routine Expenses

Approximately 14% of respondents cited expenses like children’s clothing, diapers, food, utilities, rent, mortgage, and any number of bills as a likely destination for an extra $550. Many expressed excitement or relief over the fact that this would enable them to avoid credit card debt, contribute to a savings account for themselves or their children, or enable them to afford some “extras” that are currently out of financial reach.

• “For my family that would help pay for groceries — I live with boys who can eat their body weight — and take care of a utility bill or two. Especially while my husband is still out of work. Unemployment does not nearly cover what his regular paycheck did.” — Katie A., Connecticut
• “As a family of soon-to-be eight, this is going to help us tremendously with just the day-to-day expenses. Shoes, coats, school supplies, clothes — things that I would have to strategically buy in weeks we don’t have as many bills to pay. We always benefit from a big tax return that I always put towards credit cards that helped me get through the year. This payment every month will eliminate my need to charge certain things. I’m excited to see if it will be as big of a help as I’m thinking in my head.” — Veronica A., Massachusetts
• “The money would go to our overall household expenses. Groceries, utilities, etc. My husband works as a nurse, has had COVID complications, and been unable to return to work since November. He is anxious to get back to helping others heal rather than being a patient.” — T.N., Georgia
• “We will use it for daily expenses, which often go on the credit card.” — Jessica R., Pennsylvania
• “Food! These kids are growing so much! My food, clothing, sneaker expense is through the roof! This payment is about how much we get in child support from their dad; it’s not enough to live in New York, where my divorce forces me to stay!” — Erin W., New York

Debts

Exactly 15% of respondents indicated that this monthly payment would be used to help pay down their families debts, much of which (but not all), had been accrued due to job losses and other considerations as a result of the pandemic.

• “Paying off debt due to groceries and extra items used to keep my kids engaged. Since we have been home, my grocery bill has doubled. My heating bill, internet bill and child related “project” bills — aka Target and Amazon — have increased. Our income hasn’t changed, but our bills have gone up.” — Megan G., Massachusetts
• “I would first use it to get caught up — and possibly a little ahead — on our mortgage. We fell behind last year and are really struggling to get caught up. I live with the constant fear of losing our home.” — Jade C., Pennsylvania
• “Paying off our student loan debt so that we can start to apply that monthly amount towards the kids’ 529 so they don’t have student debt.” — Tara E., Maryland
• “We’ve been committed to becoming debt-free for a while now, and with me being self-employed, an unexpected move, and kids being home all day, COVID stopped that journey in its tracks. Now we are getting back to it, and the tax credit money offers a consistent way to keep paying it down until it’s gone!” — Francie W., Virginia
• “For us, we plan on using it to help pay off debt and add to savings. We’ve been working really hard to pay off our credit card debt, and this money will go a long way to help make that happen. This money actually makes bringing the debt closer to zero a real possibility, which is so very exciting. The thought of this brings me to tears!” — Nicole M., North Carolina
• “We will use it on food and paying our mortgage that we haven't been able to pay for many months.” — Reaca P., Colorado
• “$550 a month would absolutely go to paying back down the credit card debt we have taken on with the constant changing of jobs for me since the pandemic began.” — Shawna J., Ohio

Savings

Some families count themselves fortunate to have weathered the pandemic without taking a difficult financial hit. Those families plan to divert a monthly payment to various savings accounts, often a college fund for their children. Approximately 20% of respondents said that, eventually, after other accounts were settled, that they would like to save some of these funds.

• “I will need to look into it more, but most likely it will go into savings. My husband’s hours got cut when the pandemic hit and at this point, we don’t know if he will get them back. So it would help build our savings back up.” — Sarah M., Connecticut
• “After blowing most of our savings this past year after both of us lost our jobs, it would be great to try and play catch up.” — Patricia S., California
• “It would go to their 529s to tax shelter college tuition.” — Erin L., Texas
• “We've been very lucky that COVID hasn't impacted our income, so we have put all the stimulus money we've received for the kids in their college funds, and will continue to do so if we get more.” — Paula B., Tennessee
• “We plan on putting it directly into our kids’ college funds.” — Kelly A, Rhode Island

Other

These answers were highly specific, but I thought it was interesting to see just how creatively some of these funds would be used and put back into the economy.

• “Investing in new equipment for my small business, which has taken a massive hit this past year.” — Michelle W., Pennsylvania
• “I am also strongly considering relocation, as Florida is getting weird and I anticipate it only getting weirder and feeling more like we need to blend in or get out — and blending in isn’t really our thing. With a loss of child support, this will help fill in the gap temporarily as I evaluate options.” — Jillian H., Florida
• “I would — and plan to — donate any stimulus money we get. Last time I donated to an NGO that gave it to an undocumented family. Not sure which org we’d do it with this time” — Debby V., Connecticut
• “My husband's car has become a hoopty, so we would likely apply the money to a new car payment.” — Marissa A., New York
• “I'm a single mom. I'm working on my college degree in my late 30s. With that extra money each month, I could be in school full time versus part time and finish my degree sooner.” — Corinne M., Texas