The expanded Child Tax Credit (CTC), which provides families with payments of $300 per child aged 0 to 5 and $250 per month for each child aged 6-17 from July to December 2021, has helped ease economic stress for many families.  A new nationally representative survey of parents earning less than $75,000 sheds additional light on the benefits of an expanded CTC for low- and moderate-income families.

The findings from this survey demonstrate that the CTC has reduced scarcity and created much-needed slack for these families. Scarcity is the experience of not having enough of what you need—from not enough money to not enough time. In contrast, slack is the reserves we have leftover after our needs are met. Being able to save money for emergencies creates slack—something to draw upon when unexpected things happen. That monetary slack, in turn, creates cognitive slack. If you aren’t worrying about how to pay the bills, you have leftover cognitive reserves to invest in long-term planning, relationships, or other non-immediate goals. By reducing scarcity, the CTC increases slack—both of which are important for long-term well-being.

Consistent with other research, the respondents in this survey largely plan on using the money from the CTC to pay basic expenses. The most common ways that respondents say they plan on using either the advanced monthly payments or their refund were to pay for bills, food, and groceries, help pay their rent or mortgage, towards clothing and shoes, and to pay down credit cards or debt. Reducing scarcity for low- and moderate-income families has a variety of benefits, including improved health and school performance, greater college enrollment, and increased earnings in the next generation.

Not only does the CTC help ensure that families have the resources they need, it helps create slack. The next most common way families said they would use the refund or advance payments was saving or investing the money. Savings can help families weather financial emergencies and income volatility, something that is increasingly on the rise among households in the United States. One study found that families who had as little as $250 in savings were less likely to be forced to move because they could not afford housing payments. Even as little as $100 in savings meant families were more likely to be able to keep their utilities on.

Read the full article about the Child Tax Credit by Kelli Garcia at ideas42.