Americans Will Use Tax Refunds For Expenses

A survey of adult American taxpayers notes that 52 percent of Americans will spend their annual tax refund on necessary expenses such as loans, credit cards and other household expenses, though the numbers vary according to the age group of the adults.

“As the economy continues its recovery, it's no surprise many Americans also are focused on their own recovery, paying down debt and improving their current situation,” said Scott Thoma, Investment Strategist at Edward Jones. "That said, we would encourage the nearly one-third who aren't using their refund on current expenses to instead focus on their future self by investing it in a long-term savings vehicle such as a 401(k), IRA or 529 college savings plan. Time can be your friend – or your enemy, so consider "splurging" on your retirement savings plan. Even if only a portion of the tax refund was invested each year, this offers the potential for more portfolio growth in the long term, and could help to ensure you're on track as you pursue your retirement goals."

Edward Jones noted four major characteristics of the planned use of tax returns in 2014:

• The Savers and The Spenders.  The survey found respondents between the ages of 55 and 64 are most likely to save their refund (43 percent). Respondents just a few years younger had a much different opinion, with just 25 percent of respondents between 45 and 54 years old planning to save their refund.   The survey's youngest respondents, those between 18 and 34, are most likely to put their refund checks to use on "fun" things such as clothes, entertainment and restaurants (12 percent). This compares to just 5 percent of those 65 and older who would do the same.
• The Wealth Effect.  Household income has the greatest influence on Americans' decision to save, spend or invest their tax refund in 2014. Not surprisingly, respondents with the lowest household income (those making less than $35,000 a year) are the most likely to spend their tax refund on necessary expenses (61 percent). This compares to just over one-third (37 percent) of those with the highest household income ($100,000 or more). Interestingly, the wealthiest respondents are not the most likely to invest their refunds. Those with household incomes between $50,000 and $75,000 win this title.
• All for the Children.  In general, households with children are the most likely to spend their refunds on everyday expenses, and those with older children are even more likely. Following that point, Americans with no children are the most likely (10 percent) to spend their tax refund on something "fun," whereas only 1 percent of those with children ages 13 to 17 are willing to splurge.
• Geography Makes a Difference.  Americans living in the Northeast are the most likely to invest their tax refund (11 percent). Those who live in the West are the most likely to simply save their refund (35 percent).

The survey, conducted by ORC International's CARAVAN Omnibus Services, was based on 1,018 landline and cell phone interviews of US adults conducted January 30 – February 2, 2014. The margin of error was +/-3%.

Source:  Edward jones News Release at http://www.prnewswire.com/news-releases/more-than-half-of-americans-plan-to-put-2013-tax-refunds-towards-necessary-expenses-247055001.html