More than half of Americans who expect to get a tax refund plan on spending it and few are anticipating the money will go to long-term savings like retirement or a child's college education.
More than half of Americans who are receiving a tax refund plan to spend the majority of it, according to a survey by Capital One Bank. The IRS estimates the average refund will be $3,116, up 4.2% from 2013.
Of the 80% of Americans in Capital One’s annual Taxes and Savings Survey who said they expect to get a refund, 52% reported they plan to spend most of the refund. Most of those surveyed said they will be using the refund money to pay down debt or pay off bills (58%). Others reported they will be using the refund for every day expenses or necessities (15%); a vacation (7%); major purchase such as a car or appliances (7%); new clothes or accessories (1%); and a TV, iPad, smartphone, or other electronics (1%).
The 40% that plans on saving said they will use the money for short-term savings needs, such as in an emergency fund. Fewer Americans are anticipating long-term savings like retirement (15%) or a child’s college education (8%).
“Whether your goal is to save for the future, pay down debt to help get your finances in order or even to spend all or some of your refund on something important to you, planning ahead is essential to help keep yourself on track,” Jim Kelly, head of Direct Banking at Capital One, said in a statement.
The bank offered some suggestions to help consumers boost their savings: choose a product with the best rate of return to match your lifestyle and needs; save regularly by setting up automatic transfers; and avoid unnecessary fees that will eat away at your money.
“A tax refund isn't a year-end bonus or magic windfall, it's the government giving you some of your own money back, so it makes sense to think carefully about how you plan to use it, putting that refund to work for yourself and getting on a path to save more and invest in your financial future,” Kelly said.