How can parents spend the rest of their child tax credit cash? We've got some ideas

The four remaining monthly payments this year could have a lasting impact on your family's budget. We talked to financial experts for ways to make the best use of the credit.

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Clifford is a managing editor at CNET, where he leads How-To coverage. He spent a handful of years at Peachpit Press, editing books on everything from the first iPhone to Python. He also worked at a handful of now-dead computer magazines, including MacWEEK and MacUser. Unrelated, he roots for the Oakland A's.
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The extra cash paid in advance this year is helping families cover basic necessities. 

Sarah Tew/CNET

It's nearing the end of summer, and some 36 million families across the country have already received their first two advance child tax credit payments in July and August. Those monthly advances will continue through December -- the next payment date is Sept. 15 -- with the rest coming in 2022 for a total of up to $3,600 per child. Do you have a plan for how to spend that money?

Like many parents, you might just need the cash for everyday expenses, like diapers, groceries and utility bills. Or you might be saving up for a big expense or to build a safety net for the future. We spoke with financial experts and credit counselors for their recommendations on ways to spend and save this money, from meeting urgent needs and paying down debt to starting an emergency fund. 

This year, low-income families with children are also eligible for this relief, including those who don't make enough money to file tax returns. If you have multiple dependents, there's no cap on the total credit amount you can claim. For more, here's what to know about the IRS portals that can help parents manage their payments, opt out of future checks and update their personal details. 

Decide if you want monthly checks or a bigger payout next year

Even though the first two child tax credit checks already went out, you can still make a plan for what to do with the rest of your money. Start thinking about your financial goals for the remaining checks this year and next. "The most important thing is to start planning now," Emily Shallal, executive director of consumer strategy and innovation at Ally Bank, told CNET in the spring. "You don't want to look back on this money with regret and wonder what happened."

One option is to stop receiving the remaining advance partial checks this year entirely. At this stage in the game, you'd still receive the Sept. 15 check, but you could unenroll before the Oct. 4 deadline to stop the October, November and December payments. That wouldn't mean you're turning down the credit for those months. It just means you'll collect it next year during tax season, along with the remaining amount you're owed after you file your 2021 return. 

There are several reasons why you might want to opt out, including if you're planning for a major expense in 2022, like a car or college tuition. In order to opt out, you'll have to set up an account through the online Update Portal

Pay for your family's basic needs

Cover your family's -- including your children's -- urgent needs first by budgeting for groceries, housing, utilities and essential supplies such as medicine. You could use some of the money on a necessary car repair, or a medical or dental procedure you've been putting off for someone in your family.

Make payments on your 'toxic' debts

Once you've got the necessities covered, it may make sense to take on your costliest debt. "If you're in a situation where you have a lot of what I would refer to as 'toxic debt,' paying those balances off should be your No. 1 priority," Bruce McClary, senior vice president for communications at the National Foundation for Credit Counseling, told CNET. "Toxic debt" includes high-interest unsecured debt such as credit cards, small-dollar loans and debt that has gone to collections (which could become a bigger problem later).


You can use the child tax credit money to pay off credit card debt.

Sarah Tew/CNET

Start a 'rainy-day' emergency fund 

If you are meeting other needs, you may want to put some of the money from the checks into an emergency fund to create a financial cushion. According to Mike Schenk, deputy chief advocacy officer for policy analysis and chief economist at the Credit Union National Association, a rainy-day fund can reduce a family's stress. Such a fund means when you face an emergency, like your car breaking down or an enormous hospital bill, you could have the expense already covered. 

Though the rule of thumb is to have three to six months' worth of savings in an emergency fund, that amount may be impractical for some. Schenk told CNET he recommends that you start with a more modest goal -- say, $1,000 -- and work your way up to a larger buffer.

Budget for a large future expense

You could also choose to put some of the money toward your savings to meet a longer-term goal -- for a down payment on a house, for example, a 529 account to help pay for college or a trade and vocational school, or to build up your retirement account. If you think receiving the monthly checks are too tempting to spend right away, you might consider getting one large sum for the child tax credit in spring 2022. That way you can put a large chunk aside then. 

Watch this: Child tax credit: Everything we know

Make a debt-reduction or savings plan

If creating a debt-reduction plan or savings plan seems intimidating, you can get affordable (or possibly free) help from a debt-reduction counselor or financial adviser

A nonprofit credit counseling agency such as the National Foundation for Credit Counseling can help you manage your debt, whether it's from credit cards, a home mortgage or student loans. And the agency can work with your creditors to set up reduced-payment agreements, and then help manage your payments to those accounts. In most cases, an initial debt-counseling session is free, Clary said, where you can meet with a debt counselor to go over your situation and get specific recommendations. If you decide to work with a counselor to manage payments to your creditors, the agency may charge $25 to $35 a month to manage your plan. For those below the poverty line, the agency can waive those fees.

You can also work with a financial adviser to create a plan for how to use the child tax credit money and to set goals. Schenk said as a member of a credit union, you can work with an adviser to create a plan for your specific situation. Other financial institutions such as banks may also offer financial advice as a service.

Spend on things you want

The advisers said you could set aside some of the money for something special for yourself and your family. Take your family out to dinner, for example. But they advise not using it on a large TV or to throw a party, for example, until you've hit the other items outlined in your plan. "You may end up in a time when you really need the money and just have a bunch of impulse purchases," Clary said.

For more on the child tax credit, here's what to know about common problems parents are facing. And here is a quick list of payment dates and unenrollment deadlines