Tax refund season is here; according to the IRS, the average refund in the United States in 2016 was around $3,000. This might be the largest check many individuals or families receive all year. How are you going to manage your refund? Saving money can be hard; our tax refunds can provide an opportunity for us to save.
Use Your Tax Refund to Plan for the Unexpected
One way that I like to use my tax refund is to help build my emergency fund. Planning for the unexpected is not one of the most fun ways to use money. However, this may help pay for a major unexpected expense or tide me over during a disruption in my income. My families’ tax refund is the perfect windfall to grow our “rainy day fund.” I didn’t realize that nearly 6 in 10 Americans don’t even have $500 or $1,000 to handle even small unplanned expenses. The refund could help minimize the financial impact of a natural disaster or an emergency. Saving part or all of your refund can help prepare for sudden expenses that come up, like car repairs or medical bills. Experts suggest keeping three to six months of essential living expenses in a federally insured deposit account like a savings account. Consider using part or all of your refund for an emergency fund.
Pay Down Debt Using Your Tax Refund
Another tip is to make a substantial payment toward each of the bills you owe by paying down debt. Debts that accrue interest will wreck any savings over time. Using some of your tax refund can provide a huge relief. Start to accumulate some wealth by using your tax refund to help reduce your debt.
Every little bit helps, and it’s never too late to set aside money for your future. To encourage people to save at least a portion of that sum, Commonwealth has teamed up with America Saves, a Consumer Federation of America initiative, to promote the “Save Your Refund” campaign; awarding prizes of $100 to taxpayers. There are two remaining entry deadlines are 11:59 p.m. on April 2 and April 17. All winners will have to pay taxes on their prize money.