This year, a greater percentage of Americans plan to keep their tax refunds instead of frittering them away or using them for debt, an annual tax refund survey from the National Retail Federation and Prosper Insights and Analytics revealed recently. Approximately 65 percent of taxpayers are anticipating a tax refund, and of those people, 49 percent plan to save that money.
That number was slightly higher than last year’s 48 percent, making it higher than any other time in the 12 years the survey has been conducted.
More Key Findings From the Survey
Saving isn’t the only popular thing to do with that money, though. Approximately 35 percent of people who are getting tax returns plan to use those funds to hammer away at their debt, which is similar to last year. That’s far less than the 48 percent who planned to use that money for debt repayment in 2009 during the big recession.
There was a slight increase in this year’s survey regarding how many people planned to use their tax return on ordinary expenses – 22 percent planned to, compared to 21 percent last year.
Approximately 12 percent of people expecting a refund will use the money for a vacation, while 10 percent will use it for other splurges, such as meals in restaurants, spa appointments, or clothing. As far as home improvements are concerned, approximately 9 percent plan to use their refund for that. Eight percent will use their refund for a big buy, such as a television or a new car.
Although the younger generation is sometimes portrayed by older generations as being irresponsible with their finances, it’s the younger people who are being more cautious about what they do with their tax refunds, according to Phil Rist, executive vice president of strategy at Prosper. Respondents age 18 to 24 are committed to setting aside some of their refunds into savings, Rist said on NRF.com.
Even though they’d like to save, that age group is also the likeliest to need to use their tax money for everyday expenses.
At the time of the survey, the majority of taxpayers planned to file by the end of February. Another 27 percent were expecting to file in March. And 14 percent planned to wait until April.
Why Tax Refunds Are a Good Time to Take Stock
People often think about financial matters all year round, but for many people, the biggest time of the year for windfalls is at tax time. For that reason, it’s a good time to take stock of financial progress and how to best achieve financial goals. And since the economy has picked up, fewer people might feel compelled to use the refunds for extra debt repayment.
“With the passage of tax reform and the expectation of more disposable income, we expect to see consumers prioritizing how and when they spend their hard-earned dollars, especially during the back-to-school and holiday seasons,” Matthew Shay, NRF president and CEO, said on the NRF website.