The Internal Revenue service reported that the average tax refund Americans received in 2016 was $3,053. This is a considerable amount of cash, but how exactly do people spend it? There’s no arguing that such a plentiful tax refund can go toward a number of important uses. According to Moneybanker Norway, the following are the most popular ways Americans spend their tax refunds.
What do Most People Spend Their Money On?
Wisely, most people rely on their tax refunds to pay off debt. Others invest it or stash it in the bank in their savings account. According to a poll conducted by GoBankingRates, 38 percent of Americans used their tax refunds to pay off debt, while 41 percent deposited their refund into their savings account.
When it comes to millennials, more than half stated that the plan on using their tax refunds to repay debt or simply to save. This group of people seems to be smarter with their money in comparison to previous generations. For instance, Americans who fall under the Generation X generation were also likely to use their tax refunds for savings or to pay off their debt. Younger Generation X members, who range in age between 35 and 44, are also likely to spend their tax refund money on a vacation. They are second most likely to do that after Baby Boomers, who range from 65 years and older, although Baby Boomers are less likely to receive a refund. Those 65 and older are also 42 percent more likely to stash their refund into their savings account or make purchases with the money.
Wise Ways to Use a Tax Refund
Many people can be tempted to simply splurge on their tax refund. Of course, there’s nothing wrong with treating yourself every so often, but there are always better ways to use your tax refund.
Increase Your Emergency Funds
One of the best and smartest ways to use your tax refund is to add it to your emergency funds. You should always have some money set aside just in case of a financial emergency. After all, you never know when disaster can strike. You can add the money to your regular savings account or open up a new savings account specifically for emergencies. You will definitely appreciate being so financially savvy in the future.
Pay Off Your Debt
Paying off your debt is always a wise way to use your tax refund. GoBankingRates revealed in a survey that being in debt is the number one reason why Americans are in financial stress. A tax refund can certainly bring you much needed relief because you can use it to pay off high interest credit card debt and student loans. It can also lessen the burden you feel when you are required to make monthly mortgage payments on your home.
Invest the Money
A great way to use your tax refund is to invest it. Putting the money toward investments or your eventual retirement can bring a great deal of peace of mind. If you have a savings account that is already plentiful, you won’t have to stress too much in investing your refund and making your portfolio diverse, which can increase your returns.
Invest in Yourself
You can also invest in yourself with your tax refund. Maybe you’ve wanted to start your own business or take classes to further your education. You can also use the money toward a favorite hobby or to improve yourself in some other way. Investing in yourself means you can reap the rewards in the future.
Make Home Improvements
You can also put your tax refund toward making small home improvements. This is a great way to tackle those upgrades you’ve wanted to do in your home but didn’t have the time or resources to do so. It can also ensure that your home has greater value, which is always beneficial.
Donate the Money
If you are already financially secure or want to give back, you can donate your tax refund to charity. It helps other people or animals and goes toward a great cause. Donations are also tax deductible, which benefits you twofold.
Treat it Like a Paycheck
You can also treat your tax return like a paycheck by setting some of it aside for purchases. The rest can be stashed away in the bank to save.
