Suze Orman says the new, family stimulus checks will be ‘a waste’ without this

Starting in a few weeks, more than 36 million American households will begin receiving monthly stimulus checks of a sort, from a temporary expansion of the child tax credit.

Families set to receive these payments, of up to $300 per kid, should have started getting letters this week confirming their eligibility. Based on an analysis from the IRS, the money will cover about 88% of American children.

The payments — part of the massive COVID stimulus bill President Joe Biden signed in March — will lift around 5 million children out of poverty this year, the White House has said.

Financial expert Suze Orman warns that the money will be "a waste" if you don't have a plan for using it. She has offered these tips to make sure your household bills are paid and that you're saving for the future.

Orman: It's important to have a planProstock-studio / Shutterstock

Under a one-year expansion of the child credit, middle- and lower-income families will receive $300 for each child under 6, and $250 for kids ages 6 to 17, every month during the second half of this year. The IRS says the first payment is scheduled for July 15.

"These payments are a tremendous opportunity to work on your household's security," Orman writes in her blog.

She says it's important to plan out what to do with this extra infusion of cash.

“If you don’t commit to specific uses now, you and I both know what’s going to happen: The money will just get spent — likely on wants, not needs," she says. "What a waste that would be."

If you can, involve your kids in the planning, to teach them lessons about money and budgeting.

Look at needs first

Before you spend a cent, Orman urges you to consider your immediate needs.

"Even if you have been allowed to stop rent and mortgage payments during the pandemic, there will come a time when those ‘moratoriums’ are lifted," she writes. "Saving the money to put toward shelter is obviously worth considering.”

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If your housing costs are taken care of, your next priority will be to ensure you're current on all your utility bills — especially if that means you can avoid taking on large amounts of debt.

If you're a homeowner, you could consider lowering your monthly mortgage expenses by refinancing your loan. Across the country, 14.1 million homeowners could save an average $287 a month through a refi, according to mortgage data and technology provider Black Knight.

Build emergency savingsszefei / Shutterstock

Orman says the pandemic has underlined the importance of having a robust emergency fund. And, while she used to recommend saving three to six months' worth of expenses, she now urges you to prepare for a full year.

"If you have yet to build up your emergency savings account, the child tax credit payments are an opportunity to make serious progress on reaching that goal," Orman says.

You might want to put the money into a high-yield savings account where it will grow up to 18 times faster than in a standard savings account.

Another alternative is downloading an investing app that allows you to invest your "spare change." With a little time, you can turn your pennies into a portfolio.

Stash some cash away for retirement

Orman says don't stop planning for the future once you have your safety cushion squared away: "Got the emergency fund built? Congrats. How about saving (more) for retirement?"

Even if your retirement is decades away, it's never too soon to start retirement planning so that your golden years will be worth the wait.

If you're not sure where to start, budget a little money to consult with a professional financial adviser to make sure your plans for putting money away line up with your goals for retirement.

Hire help for your own / Shutterstock

After that’s settled, Orman says you can turn your attention to right now. Those who are worn out after a year of COVID struggles and want to use the child credit funds to find relief should do just that.

“Moms burned out by the stay-at-home, educate-at-home demands of the pandemic, you are so approved to use payments to hire some help around the house or childcare outside the home as the world reopens — to give yourself some breathing room," Orman writes in the blog post.

If you decide you must do a little splurge on something fun to reward yourself for getting through this year, stretch your dollars as much as possible. For example, you might download a free browser extension that scours the web for the best prices and coupons every time you shop online.

However you decide to spend your child tax credit money, focusing on your needs will allow you to become financially secure enough to get back to thinking about your wants.

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