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How Child Tax Credit Has Changed Finance for Parents
Times are tough all over. That’s what happens when the world shuts down for a global pandemic. The economic effects are still being felt, particularly by parents with dependent children. Food prices have gone up, gas is more expensive, and utility bills are increasing monthly. Relief in any form is welcome. The child tax credit falls in that category.
This is a more serious issue than simple debt. You can always apply for a debt consolidation loan to reduce that. Not having sufficient resources to feed and clothe your children makes all other problems pale in comparison. An increase in the child tax credit, initiated by the passing of the American Rescue Plan (ARP) in March, has alleviated some of the pain.
Child Tax Credit Increased to up to $3,600 Per Child
The ARP increased the child tax credit from $2,000 to $3,600 per child and made it possible for parents to take it in monthly advance payments. That extra $300 per month can go toward food, clothing, tutoring, or in some cases even homeownership. According to Forbes Magazine, the credit lifted 3.5 million children out of poverty soon after being implemented.
Another change that was made is that seventeen-year-olds are now eligible for the child tax credit. That was not the case before, so parents with older children can now breathe a little easier, knowing that the credit won’t expire before their child’s eighteenth birthday. With this new modification, over three million households can now receive much-needed assistance.
How Parents Are Using Their Child Tax Credit
According to the US Department of Labor (DOL), consumer prices have jumped 6.2% over the past twelve months, the highest annual increase in over thirty years. Inflation is expected to continue unless the Federal Reserve raises interest rates, which is unlikely in the fourth quarter, so buckle up. Prices are going to continue going up. Parents are focused on the following:
1. Food: Global food prices have increased 30%. That’s the area where parents need the most help right now. Many have already made changes in their meal planning, opting for pork and chicken over red meat. Others are scrambling just to put food on the table. An extra $300 a month can go a long way when it’s carefully budgeted.
2. Education: According to the National Home Education Research Institute (NHERI), there are currently 3.7 million homeschool students in the US. That’s up from 2.5 million in 2019. That’s a huge burden on parents, so many of them are using their child tax credit to pay for tutoring. Others use it to pay for online classes.
3. Home Ownership: With the additional income from the child tax credit, families can subsidize childcare expenses and increase their savings towards homeownership. This is timely because interest rates are historically low right now and will remain at that level until the Fed decides to raise them again, making it a good time to buy a home.
The Bottom Line: Every Little Bit Helps
When compared to the dramatic price increases that we’re seeing, a $300 monthly child tax credit doesn’t seem like much, but every little bit helps. Parents across the US are taking advantage of this program in their grocery shopping, childcare expenses, and children’s education. They’re also saving to buy homes. The future is bright. Just hang on.