How Nurses Can Spend or Invest Their Child Tax Credit

How Nurses Can Spend or Invest Their Child Tax Credit

In 2021, the child tax credit was enhanced from $2,000 to $3,600 per child under the age of 6 and $2,000 to $3,000 per child over the age of 6.
Utilizing your CTC to settle high-interest debts, such as student loans or credit cards, can yield lasting financial benefits.
Recipients have until August 2, 2021, to opt out if they prefer to receive a single lump-sum payment.

Over 35 million families received a child tax credit (CTC) on July 15 as part of the American Rescue Plan. The credit covers 88% of children in the United States. If you’re a nurse with children under the age of 17 and have received a CTC, you may be contemplating, “What’s the best way to use this money?”

Before delving into potential approaches, let’s clarify some key facts about this historically significant child tax credit and the amount you’ll receive:

• Married couples with children making up to $150,000 are eligible
• Families with a single parent or guardian making up to $112,500 are eligible
• Families with a child under the age of six will receive $3,000 total per child or $300 per month
• Families with children between the age of 6-17 will receive $3,600 total per child or $250 per month

Read on to grasp the nature of the CTC, its distribution timeline, the option for a single large payment, and insightful suggestions on how to allocate the funds.

What is the Child Tax Credit?

The CTC is a component of the American Rescue Plan Act, which raised the credit by $1,600 for children under the age of six and $1,000 for children aged 6-17. Ordinarily, families receive the credit after filing their taxes the following year. This year’s expansion incurs a cost of approximately $100 billion.

You received the CTC because you are part of the millions of working-class families raising children. The CTC was also augmented to assist low-income families in raising children, effectively halving child poverty.

Anticipate receiving your credit in your bank account, as a check, or through a debit card in the mail.

President Biden aims to prolong the CTC’s availability for years, as outlined in his American Families Plan. However, only time will ascertain its continuation.

What Tax Benefits Can I Claim as a Registered Nurse?

The disbursements are scheduled for the next six months, with families receiving the remainder after filing their 2021 income tax return.

Can I Decline Monthly Payments for a Single Lump Sum?

You retain the option to discontinue monthly payments and opt for a single larger payment next year. Families might choose this route if they intend to:

Repay a substantial debt

Fund a significant purchase or contribute to a home down payment
Hold off on tax filing in case overpayment occurs due to a higher income bracket or if a dependent ages out before year-end

Dr. Jenna Liphart Rhoads, a nurse educator, freelance author, and editor, offered her perspective on the optimal choice. She stated, “I think it completely depends on the needs of the individual. Some people may risk spending the extra money on something unnecessary and would benefit from collecting monthly payments. Some may benefit from collecting the full amount to be able to pay off a loan faster and therefore save money by saving on interest.”

If you contemplate selecting a single lump sum, remember that the deadline to make your request is August 2. You can manage your advance payments here.

Top 6 Strategies for Nurses to Utilize or Invest Their Child Tax Credit

You might be pondering, “When can I find time amidst my demanding nursing schedule to strategize on the money’s use?” No need to worry; we’ve got you covered. First, establish a goal and ascertain the optimal plan for your family. We’ll then guide you through the process. Here are six proposals to assist you in crafting an effective plan.

1. Settle Student Loan Debt or Credit Card Debt

You can allocate the entire sum or a portion to repaying student loan debt or credit card debt. Initiate with the debt bearing the highest interest rate. Contact your bank or student loan provider to ascertain the debt with the highest APR (annual percentage rate).

Subsequently, address the one with the highest APR first. If your CTC contributes to fully or partially eradicating your debt, that’s fantastic! The National Foundation for Credit Counseling (NFCC) is a nonprofit credit counseling agency that can also provide guidance in achieving your financial goals.

2. Establish a 529 College Fund

Your demanding nursing schedule might have caused you to postpone saving for your child’s college education. However, now is an ideal moment to initiate a 529 College Fund.

A 529 college fund functions as an investment account, offering several benefits:

Tax advantages allowing tax-free withdrawals for educational purposes (in most states).
A “hands-off” investment plan where you deposit a specific amount and watch it accrue interest – a perfect fit for your busy schedule.

Age-based investment options.

Allocate a portion or the entirety of your CTC into this fund. Determine what aligns best with your family’s circumstances. For additional insights on 529 plans, explore the 529 Savings Plan Network established by The National Association of State Treasurers.

When queried about her approach to saving for her children’s future, Rhoads shared, “Both of our children have ‘fully funded’ college savings accounts (529 plans), and we have an investment brokerage account that we allocate money to pay for things not covered by the 529 plans such as room and board, apartment rent, and studying abroad fees.”

3. Initiate a High-Yield Savings Strategy

A high-yield savings account can serve as an emergency fund or a savings account. It accumulates interest over time, facilitating swifter achievement of your savings objectives. Additionally, it permits withdrawals when rapid access to cash is necessary. By legal standards, you can make an unlimited number of withdrawals or transfers from a high-yield savings account.

Storing your CTC in a traditional savings account might yield a mere 0.06% annual percentage yield (APY), as per Bankrate. Utilize your lunch break to research high-yield savings account options. A list can be found here.

4. Invest in an Index Fund

Opting for an index fund is another avenue for you and your family to accumulate savings. An index fund is categorized as either a mutual fund or an exchange-traded fund (ETF). It tracks well-known market indexes like the Dow Jones, Nasdaq, and S&P 500.

Index funds are a favorable option for nurses who feel apprehensive about active participation in the stock market. Their benefits encompass:

• Low fees
• Tax advantages
• Limited risk
• Passive investing
• Favorable long-term returns

5. Attend a Conference

Conferences often entail considerable expenses, and many establishments do not cover the entire cost. Have you been harboring a desire to attend a specific conference, yet financial constraints have hindered you? With your CTC, now is the opportune time to realize this aspiration.

Consider even opting out of monthly payments to receive a lump sum at year-end, facilitating full payment of conference fees and airfare. Remember to execute this choice before August 2.

If you lack a particular conference

in mind, contemplate seeking forthcoming conferences based on destination. You might seize the chance to visit an enticing location such

as Hawaii or Rome. Coordinate with fellow nurse friends for a collective experience. Promptly request your PTO as soon as you identify a suitable conference.

6. Prudent Expenditure

Whether your aspirations involve home improvement, saving for a significant purchase, planning a vacation, or acquiring a vehicle, your CTC presents a substantial sum of extra funds that you likely hadn’t factored into your budget. Acknowledge this opportunity to treat yourself, particularly in light of your frontline role during the COVID-19 pandemic.

Experts advise against frivolous use of your CTC, such as hosting extravagant parties or embarking on a shopping spree. Prioritize settling high-interest debts initially, subsequently allocating a fraction of the funds to dine out at your preferred restaurant or procure school attire and supplies for your children. If you’re a parent of a newborn or toddler, consider essentials like diapers, wipes, and baby formula or food.

Fostering a More Promising Financial Future

Having your financial matters in order diminishes anxiety and empowers you with greater control over your financial landscape. In the years to come, when your child contemplates their educational journey, you’ll experience satisfaction knowing that you took the initiative to save and invest for their benefit.

Rhoads asserts, “Most parents want to help their children ‘get a leg up’ in life and as young adults; saving for your child/children’s financial future is an underrated way of doing so.” She emphasizes the numerous options available for parents to effortlessly secure funds for their children.

Financial Help for Military and Veterans

As financial education is typically absent from nursing curricula, you can further refine your financial objectives by researching alternative high-yield educational savings accounts or consulting a financial advisor. Your CTC serves as an unexpected catalyst, urging you to direct your attention to financial matters. Begin paying heed and embark on planning for your financial tomorrow today.