child looking a map waht to do with advance child tax credit payments

Smart Choices for the Advance Child Tax Credit Payments

Starting in July many taxpayers will be receiving advance payments for the Child Tax Credit. You can read about these payments here. If the advance payments will “mess up” tax filing in 2022 (for 2021), you may want to opt out and the IRS will be providing a method to do so. However, in many cases up to half of the increased Child Tax Credit amount will be received spread over the last 6 months of 2021, instead of being included in your tax return and often in your tax refund. Many of us will find this advance helpful, but what is the best way to use this money?

For each of us the answer to that question will be different. But I will throw some ideas out there and whichever ones fit your situation best, those are probably good ones to consider. Maybe you have some ideas too and I encourage you to put some thought into the decision and to assess your goals before making the decision of how to best use the advance payments.

Use it to Create Some Breathing Room. I hope you are not in the position that you are struggling to pay regular bills, but if you are, then using the advance payments to help pay the bills makes sense. Then create a plan to move forward and improve your financial security. The advice I am sharing today is mostly intended to help improve financial security. You can find loads of free resources on the internet to help you improve your financial security, including articles and information we share. But if you keep finding yourself struggling or taking steps back after making forward progress, maybe consider professional financial counseling and coaching from an Accredited Financial Counselor®.

If your regular bills are fine, what should you consider next? 

Increase Emergency Savings. One thing many of us learned from the COVID pandemic is that having 3 to 6 months of expenses covered in an emergency fund is important. This should be in an account that is easy to access, like a savings account and that has volatility so you know that the money will be there when you need it.  Read more about Emergency Funds, Buckle Up! Your Emergency Fund is…

Reduce Debt. Reducing debt can give you more room in your budget for other things. It often improves your credit score (but not always), however that is not the best reason. The best reason to reduce debt is that it can help you build up more financial resilience. If you lose your job and you have a $500 car payment, then your finances will be harder to manage than if you do not have a car payment.

So now if your bills are being paid, your emergency savings is good, and your debt is manageable (or even better gone)- what next? 

Look At Your Short Term Goals.  Decide if you need to set aside some money for them rather than borrow or to limit borrowing when the time comes. Maybe you can avoid debt for Gift giving and Holiday celebrations this year. Or maybe you can save ahead for a vacation – yes except in extreme circumstances budgets should have room for fun.

And finally, Think About Your Future Self. Are these early payments of the Child Tax Credit a good opportunity to increase your retirement accounts? When they are, remember that even small amounts can make a big difference. Due to the magic of compounding, the longer your money has to grow in a retirement account the better.  But even if retirement is around the corner, every little bit helps. Ever had to struggle to financially get by until the next paycheck? The same thing happens for many who are retired. So, reduce that by setting aside some money for retirement.

Some of you may view these suggestions as boring. No snazzy new gadgets. No amazing new investments. No awesome life experiences. But a good way you get the snazzy, the amazing, and the awesome is to put yourself in a financially good place by using the boring methods. Then you can get the snazzy, the amazing, and the awesome without placing yourself in financial distress. 

I encourage you to use the Advance Child Tax Credit Payments to get to, or closer to, the financial good place. 


Our financial experts have helped many find their good financial place.  Request a free consultation call with one of Better’s fee-only, accredited financial counselors, today.  Contact – Better Financial Counseling Network


Want to read more about The Child Tax Credit Changes?

Do the 2021 Changes to the Child Tax Credit Impact You? – Better Financial

Should you Opt-Out of the Advance Child Tax Credit Payments? – Better Financial


Photo by Annie Spratt on Unsplash

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