How My Family Will Be Using Our Advance Tax Credit


This past week, my family, along with many of our fellow Americans, received our first payment in the Advance Childcare Tax Credit.

We were excited to see it appear in our bank account and right away my husband and I debated how best to spend those funds. Should we use the money to pay off some of our debt? Should we finally take that family vacation we’ve dreamed of, but could never justify the cost? Ooh! Maybe we could finally fix that wonky back step? The options were exhaustive.

This week, families will be receiving an advance tax credit. After allowing our initial excitement to wane, we realized we had an opportunity to be thoughtful and intentional about our finances. First, it is important to point out that we had the option to disenroll from the Advance Tax Credit. Because these monthly payments are automatic it can be easy to forget to acknowledge the alternative. But, some families are choosing to disenroll for a variety of reasons, including a shift in household circumstances, child custody agreements, the potential for overpayment, etc. A family could also prefer to receive the credit as one lump sum in 2022.

We also wanted to consider the purpose of the Advance Tax Credit; Why were monthly installments necessary in the first place? As explained by The White House,

While tax relief is typically available only when you file your taxes, thanks to the American Rescue Plan, Child Tax Credit payments will be provided monthly for the first time ever, beginning in July. This means needed relief will reach families sooner, and they can count on it each month to help make ends meet.

Working families qualify based on their income ($150,000/couple OR $112,500/single parent) and receive $3000-$3600/ per child based on their age. Because of the pandemic, this advancement helps families recoup their losses and hopefully regain financial footing.

Our family was grateful to qualify for the Advance Tax Credit. We undoubtedly faced many of the same struggles other families also faced: a loss of income, the absence of family childcare support (and/or childcare in general), etc. However, we also were fortunate in that none of these hardships were debilitating. Generally speaking, we were able to maintain our standard of living, pivot our job roles to work remotely, and rely on family and community for other forms of support. This money, while extremely helpful, would not be life-altering for our family.

There was incredible privilege in our ability to ask, “How will we spend this money?” So, with this in mind, how do we steward this American Tax Credit money to the best of our ability? Here are a few questions we considered:

1)      Have we created (or revisited) our family budget recently?

Woman working on a family budgetA family budget is something that really helps us talk realistically about our finances. Without it, we often over/underestimate our earning and spending habits leading to inevitable imbalance and potential debt. With this budget in mind, we can easily see in writing what areas in our life might need extra support. Perhaps we noticed we spent way more on groceries during the pandemic (guilty!) or abandoned paying off our car loan because we were not driving it as much… Whatever the case, this is a great time to get spending back in check and prioritize paying off debt as our first obligation.

2)      What are our more pressing priorities right now, financially?

What are the areas of our life in need of some extra TLC? Are there things that keep us up at night that would benefit from this extra income? I know this answer will differ for everyone, but it is an honest opportunity to prioritize those things that will make the biggest difference in our financial and mental wellness.

3)      Are we interested/in need of childcare?

Adult with a group of toddlers that are playing with blocks. Many families, including ours, had to navigate a dramatic shift in their childcare this past year. Perhaps that meant their childcare center closing OR a restructuring of the parental responsibilities to include a new chief parent and diaper changer. One thing our family noticed is that our two young children had far fewer opportunities to socialize, leading to some developmental and social delays. Now, as the world opens back up and our children are able to have more in-person interactions, we are debating if childcare is part of our new equation? Have we considered all the options including in-home care, nanny shares, formal childcare settings, or playgroups? How much money will we need to budget to be able to afford this change?

4)      Are we being mindful of our long-term goals?

After addressing our immediate priorities, are there other areas of our life that could use some financial support? I personally benefit from a partner who works in the insurance world and understands the importance of things such as life insurance for ourselves and our children. He also educated me on the benefit of enrolling in life insurance earlier in life, when costs are lower and your health is (typically) better. Other things to consider might also include retirement, larger savings, vacation funds, home improvement and upkeep, mental health, and investments.

5)      Are we in a position to share our resources?

I believe we are all in a position to share our gifts with others. Our gifts can be time, money, skills, talents, belongings, etc. As we consider this new gift of Advance Tax Credit money, then, we must also consider if we have a greater capacity to help others. Our family strongly believes that everything we have has been given, and we try to be conscious of and grateful for these gifts at all times. Without discounting our hard work, it is important to recognize those who have helped us and others who might not have had similar help. How can we make a difference now that we have this unexpected windfall? Are we able to help others?

Whether this discussion about how to use your Advance Tax Credit happens now or later, I hope you will take the time to consider these questions with your loved ones. While my own children are still too young to be part of this discussion, I hope to one day include them in similar decisions. Let us use this opportunity, if given, to model mindfulness and budgeting so that we can raise the next generation of movers, shakers, spenders, and savers.

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Guest Writer: Julie Garwood

How We’ll Be Using Our Advance Tax CreditJulie Garwood is a mom, wife, traveler, and aspiring minimalist. She has over 10 years experience as a youth development leader, working in various nonprofit organizations with children aged 0-18. She loves to create and curate practical resources for all ages, including activities for her own two young kids. Her writing focuses on the values of mindfulness, family, and intentionality. Follow her on Instagram @commomity and @juliewagenwood.


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