Child Tax Credit Impact: Families Relying on Savings Amid Payment End

Many households are digging into their personal cash reserves to make ends meet.

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Key points

• The last monthly payment to go out for the Child Tax Credit was in December.
• Since then, many families have encountered their share of financial difficulties.

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When the Child Tax Credit got enhanced for 2021, it didn't just get a boost in value. Half of the credit was also made available to recipients in the form of monthly installment payments. The first Child Tax Credit payment hit recipients' bank accounts in July, and those payments continued through December.

Meanwhile, the boosted Child Tax Credit was supposed to remain in place for 2022, during which time those monthly payments were set to continue. But lawmakers have stalled on moving the legislature forward that would allow the expanded Child Tax Credit to continue. Families who relied on the credit's monthly payments in 2021 have now gone two months without seeing that money come in. And the impact has already been quite extreme.

A harsh financial blow

The loss of monthly Child Tax Credit payments has forced a lot of families to make hard choices. In a recent survey by ParentsTogether Action, 57% of respondents said it's become more difficult to meet their family's basic needs in the absence of those payments. And 41% of respondents say they've either had to tap their savings accounts to pay their bills, or they'll have to do so without those monthly payments.

That's problematic, because if families are forced to raid their emergency savings to make ends meet, they'll risk not having adequate cash reserves on hand for unplanned bills like medical copays and home or car repairs. Those who keep dipping into their emergency funds might also risk a scenario where they become unemployed and no longer have cash reserves to tide themselves over.

What to do if you've been raiding your savings to get by

Even if you maintain a reasonably frugal lifestyle, inflation has made the cost of living so high these days your regular paycheck may not be enough to cover your bills. But continuing to raid your savings isn't ideal, because the last thing you want is to deplete your cash reserves.

If you can't make ends meet without accessing extra money, consider getting a side job if your schedule allows for it. There are many flexible side gigs available, allowing you to set your own hours and, in some cases, work from home. The latter option is a good one to consider if childcare constraints -- or exorbitant childcare costs -- have made it so you're unable to work outside the house.

Unfortunately, right now, the boosted Child Tax Credit is off the table, and so are the monthly payments that came with it last year. This doesn't mean families won't see any Child Tax Credit money going forward, though. Remember, the Child Tax Credit existed prior to 2021 -- it was just worth less money and was only payable as a lump sum in tax refund form.

But the reality is that many families will no doubt continue to struggle in the absence of monthly payments. And that's something we need to hope lawmakers will somehow manage to address.