Tax Refunds: A Savings Solution?
FARMERS BRANCH, Texas, Feb. 19, 2013 /PRNewswire-USNewswire/ -- According to a survey by the Texas Credit Union League (League), 65.6 percent of Texans who participated in a recent League survey said they plan to use their tax refund to pay off debt. Similarly, 45.9 percent of Texans plan to use their refund to jump start their savings. Only 7.3 percent of Texans are using their tax returns for large purchases, while a small number have designated the funds to take a vacation (4.3 percent).
How can people make the most of their tax refund, and how can they determine which investment option is right for them? Courtney Moran, executive director of the Texas Credit Union Foundation, suggests that consumers who don't already have one might consider using their tax refund to establish an "emergency fund."
"While it's important to save for those short and long-term financial goals, it's equally important to have a savings account that is used exclusively for those unexpected emergencies," notes Moran. "Keeping these funds separate from a regular checking account will discourage spending."
Moran points out that the IRS has made it easier for consumers to save their tax refund for a "rainy day" by allowing recipients to have the refund deposited in up to three different accounts. This gives consumers the option to earmark portions of their refund for spending and/or saving.
Moran advises people to save as much of their refund as possible, suggesting, "If you don't need the money in the near future, consider putting it away for retirement or in an IRA fund. For shorter-term savings, look into a certificate of deposit."
While Moran encourages consumers to save their refunds, she says some people are better served to use refunds to pay off debt. "Tax returns are a great way to get rid of high-interest credit card debt or a short-term personal loan," said Moran. "Credit cards tend to carry a highest interest rate, so keeping this debt to a minimum is beneficial."
TCUL is currently asking Texans if they are considering purchasing a home or car in 2013. That survey can be taken online, at https://www.research.net/s/MarPoll.
CONSIDER THIS: Tax refund time is just around the corner, and many Texans are eager to pay down debt and jump start their savings. Last year, the Internal Revenue Service (IRS) issued more than 104 million refunds totaling $282 billion. For many Americans, their tax refund represents the most substantial savings investment they will make all year.
Media elements: Pie charts available online, at http://www.tcul.coop/consider_this.html.
About Texas Credit Union League
The Texas Credit Union League is the state trade association serving more than 500 credit unions in Texas. Organized in 1934, the Texas Credit Union League supports credit unions, not-for-profit, member-owned, volunteer-directed cooperatives, which in turn are owned by nearly eight million members. For more information, visit www.tcul.coop.
SOURCE Texas Credit Union League