How Child Tax Credit Payments Affected the Lives of Families with Young Children
From July to December 2021, millions of American families received monthly payments through an expanded Child Tax Credit (CTC). Throughout that period, we used the RAPID survey to collect data from 3,953 families with young children on their experiences with the CTC. Listening to this diverse sample of families (in terms of race, ethnicity, income, and geography) helps tell the story of how the CTC affected American families with young children. We now look back at these stories to explore families’ experiences with the monthly CTC payments before, during, and after their distributions.
June 2021: Households with young children were burdened with debt and overdue bills, and were looking forward to the monthly CTC payments helping them cover basic needs and pay off debt.
In June 2021, one of four families in our survey had unpaid debt and overdue bills. Fifty three percent of these families reported that they had more debt compared to before the pandemic. Black and Latinx families reported more debt compared to white families, which is likely a result of the increased financial uncertainty and material hardship that Black and Latinx families in the U.S. experience. Similarly, lower-income households (i.e. below 200% of the federal poverty level, or FPL), who account for 40% of the U.S. population, reported higher unpaid debt and overdue bills compared to their middle- (i.e. 200%-400% FPL) and higher-income (i.e. above 400% FPL) counterparts.
This rising debt during the pandemic was associated with parents’ experiences of emotional distress (a composite of depression, anxiety, stress, and loneliness symptoms). RAPID data has found a cascade of emotional distress among parents which is, in turn, associated with emotional distress among their children, as parents may be less able to consistently provide the nurturing care children rely on.
A high percentage of families (84%) in our national survey expected to receive the CTC payments. We found differences in the CTC expectation rate by race/ethnicity and income levels: fewer Black (80%), Latinx (79%), and lower-income households (85%) reported that they expected to receive the CTC payments than white (86%) or middle-income (91%) families.
The Center on Poverty and Social Policy at Columbia University estimated that the monthly CTC payments would reduce the number of children living in poverty by 45%. Our data aligned with this estimation. About half of the families with young children participating in our survey planned to spend the payments on basic needs, household necessities, or paying off debt.
In addition, one in four parents reported that they planned to put some of the payments into savings. Families’ plans on how to use the CTC payments again varied by race/ethnicity and income levels. Black (57%) and Latinx (57%) parents were more likely to use most or all of the payments to cover basic needs, household necessities, and debt than white parents (46%). And lower-income households (57%) were more likely to use the CTC payments in this way than were middle-income (44%) or higher-income (32%) families.
July 2021-December 2021: The CTC buffered families with young children from severe financial hardship.
Our surveys assessed families’ use of the monthly CTC payments from its initiation in July 2021 to December 2021 when the payments stopped. We found that the majority of families spent the payments on basic needs (e.g., food, housing, utilities; 55%) as well as unpaid bills and household essentials (including child care expenses; 52%). In addition, 38% of parents reported putting some of the CTC payments into savings for their children.
When comparing CTC spending in households of different sociodemographic characteristics, we saw significant differences. Three in four (73%) lower-income families used the CTC payments to meet their basic needs, and over half (57%) spent CTC on unpaid bills and other essentials, including child care expenses. These rates were lower among middle-income families (44% for basic needs; 50% for unpaid bills/other essentials) and lower still among higher-income households (28% for basic needs; 44% for unpaid bills/other essentials). In contrast, higher proportions of higher- (51%) and middle-income (42%) families put the CTC payments into savings for their children than lower-income (28%) households.
We also examined how the monthly CTC payments affected families’ experiences of material hardship. We found that the CTC effectively moderated material hardship and helped families maintain financial stability. In families that did not receive the CTC, rates of material hardship steadily increased between July and December 2021. In contrast, rates of material hardship since July 2021 remained stable among households that received the CTC. This buffering effect of the CTC was most pronounced among lower-income families.
January-March 2022: As the monthly CTC payments end, families with young children, especially lower-income households, face increasing financial challenges.
Policy makers chose not to extend the CTC and families received the last monthly CTC payment on December 15, 2021. As we have continued to survey families since that time, we have found that the majority of parents were aware that the monthly CTC payments had been discontinued (88%), and that they needed to file taxes this year to get the remainder of their increased 2021 CTC (90%). These rates were consistent across households of different race/ethnicity groups and income levels.
Given that the CTC payments can be distributed in two ways—through monthly payments and through a lump sum when filing taxes—we were also interested in parents’ preferences for receiving this tax credit. Two in three (66%) parents of young children preferred the monthly payments over a lump sum. This is not surprising considering that families with young children have also been challenged with high degrees of financial unpredictability during the pandemic.
In the face of week-to-week and month-to-month changes in employment, income, and material hardship, it seems that monthly CTC payments can better help households with young children consistently meet basic needs and maintain financial stability.
The ability to consistently provide basic needs for one’s family is a protective factor for parents’ and their children’s emotional well-being. Our data suggest that greater predictability in ability to meet basic needs is significantly associated with increased emotional well-being among both parents and their children.
This winter (2022), to more deeply explore the impact of discontinued monthly CTC payments on households with young children, we analyzed parents’ responses to the open-ended survey question “How would it impact your family's financial situation if Congress decides not to continue the monthly Child Tax Credit payments?” The topics that emerged from parents responses highlighted the negative impact of the discontinuation of the CTC on families. The three most prevalent topics named by parents included “negatively affect financial situations,” “make it difficult to pay bills,” and “decrease savings for children.”
Moreover, we observed significant differences in responses between families of different income levels, indicating the existence of structural inequalities. The bar chart below shows the frequency with which specific topics occurred in the responses of lower- vs. middle-/higher-income households, controlling for the effect of race/ethnicity. As the figure shows, the main challenges brought by the discontinuation of the monthly CTC payments for lower-income households are directly related to financial hardships and meeting basic needs, whereas for middle- and higher-income families, the primary impact is on reduced savings.
In summary, findings from RAPID’s national surveys suggest that the monthly CTC payments played a critical role in reducing families’ financial hardship and helping households meet their basic needs. The data also show that the discontinuation of CTC payments has had a negative impact on families with young children. It is also clear that, because of inequities long-built into our structures and systems, the positive impacts of the monthly CTC payments were more profound among Black and Latinx families, as well as lower-income households with young children. Since the monthly CTC payments have been discontinued, these families are again experiencing difficulty paying for basic needs.
What parents are saying
The CTC has helped us to be in a position where we aren’t just surviving. We could actually provide our kids with fun recreational activities that they had been missing.
Connecticut parent
It would have a negative impact [if the Child Tax Credit is discontinued] and make our lives more difficult as we are struggling to maintain our finances with it. We will have to make even more sacrifices than we already have, especially as prices continue to go up.
Nebraska parent
Losing the Child Tax Credit has already impacted our family. We used the CTC for food, clothing, bills or other necessities needed for the month. Now that it has been discontinued we no longer have a cushion if we need more food or have an unexpected bill.
New York parent
The CTC payment was allowing us to pay our car payment. Now without it we are struggling and are going to be late on rent because we are struggling to pay for both our car payment and rent. We are in a free fall.
Pennsylvania parent
The CTC payments have been helpful for getting food, paying for school [and] keeping up with bills. To not have it this month has us scrambling to find side jobs or extra work to cover everything.
California parent