The average federal income refund for this year was nearly $2,900, resulting in tens of billions of dollars ready for use. Instead of spending those funds, financial advisors recommend saving for an emergency fund, retirement, or other household goals. Currently, these refunds represent an amount larger than the average annual personal savings rate of most Americans. Spending the refund on things you don’t need often results in reduced future financial security.
Also, consider reducing your withholding throughout the year. The refund you receive is only getting back money you lent the government over the past year at zero per cent interest. Instead, have an automatic withdrawal sent to your savings each month.
For additional information on saving your tax refund, click here.
- Have students conduct a survey of people to determine how tax refunds are used..
- Have students prepare an analysis of lost interest/earnings by taxpayers who received a large refund each year.
- What are the benefits of receiving a large tax refund?
- What are the drawbacks of receiving a large tax refund?