Parents, especially those from lower-income households, said they were doing much better financially last year, and the government’s expansion of child tax credits may have played a big part. in this regard.
That’s according to a Federal Reserve report, based on the annual National Survey of the Economy and Household Decision Making (SHED), primarily based on data collected last October and November. The report, released on Monday, found that the share of Americans who said they were able to cover $400 in emergency expenses, using cash or its equivalent, hit a 9-year high.
Lawmakers increased the child tax credit to a maximum total of $3,600 for children under age 6 and $3,000 for children ages 6 to 17. The CTC was temporarily extended in 2021 by the American Rescue Plan Act. Families who qualified for the enhanced CTC received monthly advance payments of up to $300 per child under age 6 and up to $250 per child between the ages of 6 and 17.
Parents living with children under the age of 18, among others, are among the groups who said they saw a huge increase in their financial well-being in the past year. About three-quarters of parents said they were doing at least well, up 8 percentage points since 2020 – when the pandemic started, although that share was even lower before the pandemic. The share of other adults did not decrease in 2020.
The report’s authors said the reasons for the increase were likely multiple – most schools have resumed in-person classes, significantly freeing up time and resources for parents who needed help with child care. At the same time, the financial assistance provided by the government also contributed to the resources available to parents. A majority of parents have seen their monthly income increase due to the increase in child tax credits.
While most high-income parents said they saved a greater share of the additional benefit, parents from low-income households said they used the money to pay bills – mainly housing, as well as spend it on their children and/or the household. food.
Consequently, low-income parents reported an even greater increase in their financial well-being in 2021 than other parents. For those with an annual income of less than $25,000, the share of parents who reported feeling “at least good” increased by 13 percentage points in 2021 to 53%.
The authors also pointed out that because some parents were able to save the child tax credit — or at least part of it — it potentially boosted their ability to cover an emergency expense.
Government officials said on a press call on Monday that the improved financial well-being of parents was due to a variety of factors, and they could not determine whether expanding the child tax credit in was the main reason.
The expanded version of the Child Tax Credit ended last December, with the credit returning to a maximum of $2,000 in 2022. In the final days of the additional credit, some parents have become increasingly worried about rising prices due to inflation.
However, advocacy groups have highlighted the importance of these checks in helping low-income families.
The Economic Security Project, an advocacy organization working to expand the Child Tax Credit and other government tax breaks and benefits, released its own survey of 1,214 adults, using the same set of questions. in the SHED report.
More adults (49%) were unable to cover that $400 emergency expense in May 2022 — up from 32%, according to the Fed’s own survey of 11,000 adults in November 2021.