Stimulus Update: New Study Shows How the Child Tax Credit Money Has Directly Benefited Kids

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Lawmakers may still be at odds on the continuation of the new Child Tax Credit benefits -- but there is no argument that the money has been a big help for kids across the nation.


Key points

  • Enhanced Child Tax Credit monthly payments will end in December, leaving only two more payments set to go out to families in need.
  • A new survey by the Census Bureau shows that extended Child Tax Credit benefits have helped to cover childcare expenses, school-related expenses, and have brought down household debt levels.


Over the last few months, the expanded Child Tax Credit has helped millions of low- to moderate-income American families make ends meet. This money, which is issued each month to bank accounts and mailboxes by the IRS, has been an essential lifeline for households with children who were hit hard by the effects of the pandemic. But, that lifeline is scheduled to dry up very soon if lawmakers can't come to an agreement on an extension of the program.

Without an extension, the enhanced Child Tax Credit benefits are slated to end in December. What that means is that just two more monthly tax credit payments are scheduled to be issued to households who qualify. But while the program is slated to end this year, there is still a chance that lawmakers could agree to extend the program past 2021. A proposal to extend the new tax credit benefits was included in President Joe Biden's Build Back Better plan, and lawmakers are currently debating on whether or not that should happen.

If lawmakers cannot come to an agreement on an extension, it will be a huge hit for at-risk households, many of whom have come to rely on the monthly financial boosts to help pay for essential bills, like rent and food. In turn, this extra money has reduced financial anxiety for parents and lifted millions of kids out of poverty. And parents aren't just using the money to cover rent -- a new study shows that they're also using the extra cash to cover child-related expenses, too. As we await the fate of the enhanced tax credit, here are three ways the recent Child Tax Credit payments have directly benefited children across the nation.

1. The payments helped cover childcare expenses

Childcare is a routine -- but extremely costly -- expense for households with young children. About 55% of U.S. families spend at least $10,000 a year for childcare -- and thanks to closures, capacity limitations, and other pandemic-related changes, some families' childcare costs have skyrocketed over the last couple of years. Luckily, the tax credit money has helped at least some parents pay for this expense in recent months.

According to the new Household Pulse Survey from the Census Bureau, about 1 in 4 households with young children -- or about 26% -- used the money to cover childcare costs from early August to late September. That's a small but substantial increase from late July, when 1 in 5 families -- or about 22% -- were spending the money on childcare.

2. The money went toward school expenses, too

School-related expenses, like books, backpacks, and other supplies, can be pretty costly for families -- especially lower- and middle-income households who are on limited budgets. Parents were expected to spend an average of $529 per child on school supplies in 2020, despite many children learning at home in remote classrooms due to the pandemic. And, the costs of school expenses were expected to increase this year thanks to rising inflation, which has made consumer goods a lot more expensive.

Luckily, those expenses were a little easier to swing for many households this year thanks to the tax credit. Per the new study data, 3 in 10 families who received the August and September tax credit payments spent at least part of the money on their kids' school expenses. This included books and supplies, tuition, after-school programs -- not including tutoring and childcare -- and transportation to or from school.

And, it appears that the tax credit money helped minority families with school-aged children in particular. By late September, an estimated 4 in 10 Black families -- or about 42% -- and about 3 in 10 Hispanic families -- or about 31% -- used the money for school expenses. On the other hand, only about 1 in 4 non-Hispanic white families -- or 26% -- used the tax credit money for these types of expenses.

3. Children are now living in households with less debt

As we saw with the earlier spending trends, households are still using at least part of the recent tax credit payments to cover living expenses and household debt, too.

From late July through September, about half of the households receiving the tax credit money reported spending at least part of it on food. Another 4 in 10 households reported spending the money on their rent, mortgage, or utilities -- helping to relieve some of the financial burden that these routine costs can place on parents across the nation.

Another 4 in 10 households reported that they used most of the money they received to pay off debt -- which mirrors the debt payoff trend found with earlier studies. That said, the new study also shows an uptick in households reporting that they "mostly spent" the money on debt.

Per the study, the number of households using the money for debt payments increased by about 6% -- jumping from 27% earlier in the year to 33% by late September. This is further proof that the households with children were hit the hardest by the pandemic -- and that the tax credit money has been essential in decreasing the hardships on children and adults in these households.

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