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IRS stimulus check, child tax credit update: Why some experts say not to invest them

Putting your stimulus in the stock market is tempting, but some experts say you should have at least a year’s worth of savings first.

IRS stimulus check, child tax credit update: Why some experts say not to invest them
[Photo: Sharon McCutcheon/Unsplash]

If you were planning to dump your stimulus check or child tax credit payments from the Internal Revenue Service (IRS) into an investment portfolio, think again. Some experts say to hold off on that forward-thinking plan. Here’s why:

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  • Don’t pay off credit cards or cars. “Continue to pay the minimum, or just play it safe until things are back to normal, financially speaking, in your life,” said financial expert Suze Orman on CNBC, who points to both a volatile job market and a volatile stock market.
  • Don’t invest in the stock market. It’s too unstable, says Orman. Despite this, half of young people (ages 25-34) plan to invest in the stock market, according to a survey by Deutsche Bank.

Orman has been telling anyone who will listen that your 2021 priority should be a 12-month emergency fund. Eight months bare minimum. She calls this your key to freedom. “If you don’t have that, I would not be investing in the stock market at this point on any level,” she says.

A high-yield savings account is an ideal place to stash an emergency fund, Nicole Kubin, founder of Strategic Divorce Advisory told Fox Business. “They’re safe, there’s no chance involved and they provide immediate liquidity.”

For parents who are financially stable, an excellent strategy is to use the child tax credit toward a college savings plan, Brent Weiss, cofounder of Facet Wealth, told CNBC. The child tax credit pays up to $300 per month (delivered monthly beginning in July). A $300 per month investment, growing at the S&P 500’s historical return rate of 10% for 15 years, will be worth over $120,000 per kid when it’s time for the munchkins to head to college.

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