As more Americans plan to save their tax refunds, fewer plan shopping sprees
If your tax refund plans include indulging in a vacation or shopping binge, you’re in the minority.
That’s because only 6 percent of Americans plan to spend their tax returns on splurges, Bankrate says. Instead, most are saving or investing (34 percent) or spending their money on home necessities, like food or utility bills (29 percent).
Yes, most tax refund-getters are stashing their cash away. That number is ever-increasing as the years go by, but there are still some that plan to splurge. Maybe they’ll go to a salon, have a fancy meal out, or buy some new clothes — hopefully nothing extravagant.
And the number of splurgers is dropping: more than one-third of Americans are looking to pay down debt while nearly half are planning to save their tax refund, either in a savings account or long-term retirement plan. The biggest group of savers? Millennials.
“Millennials are actually the age group most likely to have already filed their 2016 returns, and the age group most likely to save or invest their refund,” said Sarah Berger, The Cashlorette at Bankrate.com. “This shows a sense of responsibility and overall financial savviness among young adults. They’re setting up a solid foundation for their future financial selves. It can be tempting to splurge with that refund, but saving it is so much smarter; consider it an investment in yourself.”
The survey, conducted in mid-February, discovered that about 25 percent of Americans had already filed their taxes. Almost 30 percent plan to wait until after April 1 to file.
What’s in a tax refund?
Well, what’s not in your tax refund is a saving grace. Most families who use their tax refund for a major debt, like a medical bill, auto repair, or a combination of debts will successfully do so, but it won’t get them out of debt, even a year after that chunk of it was paid.
It’s natural for families pay off debt when they can afford it. Many debts are paid off in March and April — the usual time they receive a tax refund. But after the debt is paid, many families have a hard time rebounding from paying that debt, because that money could’ve gone to other things, like household necessities and utilities, among other things.
Because families aren’t prepared for emergencies, some rely heavily on tax refunds to pay off debts that were once an emergency, like medical bills. Unfortunately, it doesn’t prepare those families for future emergencies, so important financial investments like basic savings or an IRA don’t get much money attention since bigger financial priorities take precedence.
While we should all be saving for emergencies so we aren’t relying so heavily on tax refunds, sometimes our income doesn’t allow it. But is your budget the best for you? Are you sure you aren’t spending too much in other places that could get cut? Use our Solutions Center to create a budget that works for you and your family to avoid financial disasters before they happen.
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Article last modified on May 10, 2017. Published by Debt.com, LLC . Mobile users may also access the AMP Version: Settling the Splurges - AMP.