Child tax credit: Financial coach recommends installment payments


JOHNSON CITY, Tenn. (WJHL) – The Biden administration’s American Rescue Plan allowed for an additional $1,000 on top of most American families’ child tax credits for next tax season. Now, parents must make the choice between lump-sum payments next year or monthly installments starting this July.

Local financial coach with Appalachian Opportunity Fund, Oren Peterson, told News Channel 11 that his advice was based on the parents’ current financial situation when making that choice.

“I think it would be a great addition, monthly, as a, not in the lump sum. The reason I think that is because it’s easier to kind of spread out over the entire year. And, and use towards monthly bills that way. The only benefit I could see to receiving it as a lump sum would be is if you were going to invest it in something that earned interest, because the longer it’s in that account, the more time it has for that interest to accrue, but that’s really only if it’s not going to be used for immediate expenses,” Peterson explained.

One local parent told News Channel 11 he thinks the lump sum option would create less waste.

“Personally I think getting it in one lump sum would help the healthy economy and the individual, just in and out of itself more getting it all at one time. Just because you can pay off so much all at once versus getting that money and so much easier to waste and not really think about what you’re doing with the money, and just basically don’t want to throw it away versus paying a lot off all at once,” Chris Crumley said.

He added that the extra $1,000 (or more in some cases) in child tax credit is invaluable to working parents.

“It is a lot of money that’s basically get coming out and the taxpayers and everything are going to eventually end up having to pay for it, but yeah I mean it’s definitely going to be helping out people in need, and people are raising a lot of children and just the next generation so it’s going to a good cause,” Crumley said.

Peterson, however, said the lump sum option should be considered by parents who are more financially stable.

“And not think of this as winning the lottery or a windfall of money, really look at it, look at it as a small increase in income. So try to use it towards things that you only have to buy, and no new expenses,” he said.

Peterson suggested not putting the fluctuated funds in a savings account.

“Standard savings accounts really are not accruing much interest at all right now. Very few are, but with the increased rate of return, there’s always an increase in risk, and so that’s why I think that the investment avenue is really for parents who don’t feel like they’re struggling. I think one of the best ways to invest currently is using your smartphone. There’s a multitude of really cool apps that you can set up, and they walk you through very in a very intuitive user interface,” he explained.

But in the end, it’s all about the kids.

“There’s a lot of people who abuse it, but there’s a lot of people who need it and actually it helps out for a lot of good causes, and a lot of bills get paid and people get behind on stuff and when you’re taking care of kids, it’s a lot of work. So, I think it’s a good cause,” Crumley added.

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