TAMPA, Fla. — Eligible parents will start receiving child tax credit checks either in the mail or direct deposit on Thursday.
The goal of these early tax credits is to help parents get back on their feet after the pandemic.
ABC Action News is looking at the bigger picture and how parents can make the money last much longer than a just few months.
“What was confusing first and foremost, so we got a lot of calls of people that said, ‘Hey, I’m going to get $3600 bucks or I’m going to get $3000 bucks per child, and it’s not quite that simple,” said Jason Mickool, the president and CEO of Florida Financial Advisors.
Parents who meet the income criteria ranging from $150,000 annual income together or $75,000 single, will get a check for each child every month left in 2021. It will be $300 for children 5 and under and $250 for children ages 6 to 17. Then the rest will show up with your income tax refund– $2100 for children 5 and under, $1750 for older children.
However, if you’re annual income is more, you get $50 dollars less for every $1,000 more you make.
“It’s a windfall next year, especially if you have two, three kids, your tax refund could be $4500, $5,000, plus we just got five grand,” Mickool explained.
Parents in Tampa Bay are grateful and most mentioned spending it on the upcoming school year.
“School uniforms and school supplies, of course, just the everyday bills like gas, utilities and everything,” parent Elisabeth Wisniewski told ABC Action News.
“Kids are a lot of money and so we’ll take any help we can get,” another parent, Matthew Hendricks, said.
So how can parents make the most of this money beyond just a few checks?
The first thing experts advise is making a plan. Sit down and write out a list of what payments you have right now or in the near future and what needs to be prioritized.
“I think one of the big challenges of what people do so as soon as they do this thing is they put that in their budget, they’re like, ‘Oh wow I have $500 extra a month, and I need a new car, or I have $500 a month coming in and I need a new TV…’” Mickool said, “And the next thing you know, that gets built into your cash flow and you think that’s money that will continue to come and it will disappear.”
Once you can pay off whatever priority payments you have, you want to try and make a reserve fund, just in case another shut down happens or you need emergency cash.
Next, Mickool says to try to avoid giving away any more of your money in unnecessary interest.
“Fix some of the leftover issues that might be happening because of the pandemic, which could be high-interest credit card debt, or bad decisions on car loans, high-interest student debt,” he explained.
Last, think about your 401K or Roth IRA to start turning a small chunk of change into much more in the future.
“The money that you put into a Roth IRA is available to anytime prior to 59 and a half, so it kind of doubles as a cash reserve and a tax shelter for opportunities moving forward,” Mickool advised.
If all of that seems impossible, you can start small. Mickool suggests planning out your errands to spend the money at places that are cheaper or sell in bulk than at more expensive, convenient stores. He says people think they can’t save, but they’d be surprised how the little things can add up.
Financial experts also advise not to get caught up in smaller, short-term stocks at first. For example, smartphone apps that invest in the latest trend, Mickool says, could tumble very quickly and you could lose it all.
If you’d like to learn more about investing, Investopedia is an online resource to read more.
Mickool also suggests the smartphone app Mint to track all of your spending and investments in one place.
You can read about all types of retirement savings plans on the IRS website.
If you are clicking around online to find investment help, be sure to check URLs before you click them to avoid scams. Make sure there are no typos and that the link that appears when you hover the mouse over the words is the same as the listed source.