Many Americans are planning to use any refunds they get from the IRS to grow their personal wealth.
Some 46% of people plan to save their refunds, according to a LendingTree survey of more than 1,000 taxpayers conducted online Feb. 7 through Feb. 10. That figure has increased from 41% in 2021 and 40% in 2020, according to LendingTree.
Nearly 38 million Americans have filed their 2021 tax returns so far and the IRS has sent out a total of more than $129 billion in refunds through March 4, the agency reported. That breaks down to an average refund of $3,401, nearly 14% higher than last year.
For a lot of people, a tax refund is the largest check they get all year and can be a crucial part of their budget. Aside from saving, Americans are also looking to use their refunds to pay down debt and boost family budgets, the survey showed.
“It is good to see that people have used [a refund] or intend to use it primarily to save and pay off debt, especially because things are just getting more expensive by the day and debt is only going to get more expensive as the Fed continues to raise rates,” said Matt Schulz, chief credit analyst at LendingTree.
The data also showed that younger workers, women and those with lower incomes were more likely to use their refunds to save, pay down debt or for necessary expenses.
“One of the great lessons of the pandemic is just how important savings are,” said Schulz. “A lot of people really learned that lesson — you don’t know when that rainy day is coming, and you don’t know how strong the storm is going to be.”
More than 60% of Gen Z respondents, ages 18 to 25, said they will put their refund cash into savings, compared to 47% of millennials and 41% of boomers. Those in Gen Z were also more likely to invest their refunds, the survey found.
More from Invest in You:
Want to give your finances a spring cleaning? First, get organized
Here’s what to know about managing your debt in retirement
Want to find financial success? Here’s how to get started
Women were slightly more likely than men to use a refund to pay down existing debt. Some 41% of women said they’d put a refund towards debt management, compared to 34% of men.
This may be because of necessity, said Schulz, pointing out that women tend to experience more financial headwinds than men — they often earn less, are more likely to be a single parent and may take time off to care for children or other family members.
Others are using their refunds just to get by. One-third of those who made less than $35,000 last year said they would use their refund to pay for necessities such as rent and groceries.
“As inflation continues to grow and interest rates continue to rise, I would suspect that number is only going to grow,” said Schulz. “It’s a tough situation for those folks.”
To be sure, some of those surveyed said they were looking to use their refund at least partially to splurge on something they’ve been wanting to buy or book a vacation.
SIGN UP: Money 101 is an 8-week learning course to financial freedom, delivered weekly to your inbox. For the Spanish version Dinero 101, click here.
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.
- The Benefits of Meal Prepping for Busy Moms - October 28, 2023
- The 11 Best Cash ETFs in Canada (Plus HISA ETFs and Money Market ETFs) - October 8, 2023
- Build a Variety of Outfits with These 7 Affordable Pieces - October 7, 2023