If you're eligible for advance child tax credit (CTC) payments provided by the American Rescue Plan Act, you might wonder if you should spend the extra cash. Some families are incurring extra child-care costs so the parents can return to work. But others don't have any imminent child-care-related expenditures to cover.

Rather than spend the money on a trip to Disneyland or new smartphones, you might want to invest in your child's future by starting or contributing to a tax-favored Section 529 college savings plan. Here's what you should know:

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About the Child Tax Credit (CTC) and advance payments

Taxpayers are allowed a CTC for each qualifying child. The credit was temporarily expanded and made refundable for 2021 by the American Rescue Plan Act (ARPA). It phases out for taxpayers with adjusted gross incomes (AGIs) over certain thresholds.

Eligible families will receive up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 and older.

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