I’m a Financial Expert: 5 Ways You Should Use Your Child Tax Credit

Knowing how to make the most of the Child Tax Credit can sometimes be tricky. Whether you’re looking to use the credit for immediate needs or planning for the future, there are several smart ways to put that extra money to good use.

GOBankingRates spoke with Kevin Shahnazari, founder and CEO of FinlyWealth, to discuss the best ways to go about it. “Managing money effectively isn’t just about what you earn; it’s about how you maximize every dollar. The Child Tax Credit presents a rare opportunity for families to strengthen their financial future if used wisely,” he said.

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Here’s some of his best advice for managing your Child Tax Credit.

One of the smartest ways to use this money, according to Shahnazari, is by building an emergency fund.

Many families are one unexpected expense away from financial hardship, and having three to six months’ worth of savings set aside can be the difference between stability and crisis.

Instead of letting the money disappear into everyday expenses, setting it aside in a high-yield savings account ensures it’s there when it’s truly needed.

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Shahnazari noted that credit card debt can drain wealth faster than almost any other financial obligation due to skyrocketing interest rates.

Using the Child Tax Credit to eliminate or reduce this debt provides immediate relief and frees up more cash flow for future financial goals.

Every dollar used to pay off debt is a guaranteed return on investment because it stops interest from piling up.

Investing for long-term growth is an opportunity many parents overlook when it comes to managing their child’s financial future. It’s easy to focus on short-term needs and immediate expenses, but making strategic investments early can have a lasting impact on your child’s financial security.

According to Shahnazari, contributing to a 529 college savings plan ensures that money works toward your child’s future education rather than burdening them with student loans later.

If college savings are already in place, he said parents can also consider a custodial Roth IRA, where even small contributions today can turn into substantial financial security for their child’s future.

Using the tax credit to boost retirement savings is another move Shahnazari said comes with lasting impact. “Many parents prioritize their kids’ immediate needs but neglect their financial security,” he said.