Child Tax Credit Checks

Bring Extra Cash

ROCKVILLE, MD. — About 25 million American families will be receiving a check from the Internal Revenue Service this summer as a result of a new tax law raising the Child Tax Credit.  The checks are an advance payment for those who claimed the Child Tax Credit on their 2002 income tax return and can be as high as $400 for each child claimed.

“The Child Tax Credit checks will bring some welcome cash to the eligible families this summer,” said Steve Rhode, president and co-founder of Myvesta.org, a nonprofit financial management organization.  “But while many people could really use the cash for necessities or paying off debts, I have a feeling that most of the checks will magically turn into DVD players and digital cameras.”

According to Mr Rhode, most people have already spent their checks two or three times over in their minds by the time the check arrives in their mailbox.

“When people are notified they will be receiving some extra cash in a few weeks they often go out and charge a whole bunch of stuff on their credit cards thinking they will be able to pay it right off,” Mr Rhode said.  “Studies have shown that when people receive a financial windfall of any kind, they end up spending twice as much as they received after all is said and done.”

With many Americans neglecting their savings accounts and adding to their debt loads, Mr Rhode recommends using the rule of thirds when deciding how to spend the money from the tax checks.

“Before you go out and spend up a storm, divide the money you are receiving into three parts,” Rhode said.  “Take one-third and put it into savings, put one-third towards debt, and take the last third and go nuts with it.  That way you can have some fun, pay down debt, and boost your savings.”