With tax season finally behind us, Americans are sitting on billions of dollars in refunds. Now, they just have to decide how to spend the money.
According to the latest IRS figures, tax refunds thus far total just over $267 billion, a 19.6% increase over 2021. The average refund is $3,012.
That is a nice chunk of change, and it leaves millions to ponder where that newfound cash should go.
Recently, LendingTree surveyed more than 1,000 taxpayers and asked them what they planned to do with their refund. Following are the most common answers.
1. Save it
Taxpayers using refunds for this purpose: 46%
For many people, the wisest move they can make with newfound cash is to stash it into their savings. So, it’s heartening that nearly half of those getting a refund plan to save the money.
Keeping a cool head and thinking about long-term goals — rather than short-term satisfaction — is a recipe for success when you suddenly receive a pile of cash.
For more tips on how to handle an influx of money, check out “Sudden Money: 6 Tips to Manage a Windfall.”
2. Pay off debt
Taxpayers using refunds for this purpose: 37%
While saving a windfall is usually the wisest thing to do, paying off debts may make more sense in some situations. This is particularly true if you have debts with high interest rates attached to them.
More than one-third of taxpayers plan to apply their refund to paying down debts. Who says Americans are always foolish with their money?
For more tips on getting out of the red, check out Money Talks News founder Stacy Johnson’s advice in “Tips and Tricks to Help You Destroy Debt.”
3. Pay for necessary household expenses
Taxpayers using refunds for this purpose: 22%
Sometimes, you have to spend a windfall, no matter how much you would prefer not to do so.
If the roof is leaking or the family car is down to its last few miles, spending your tax refund might be the sensible thing to do, as it will be for nearly one-quarter of taxpayers this year.
Survey respondents named several other things they plan to do with their refund money. The most popular of the remaining options were:
- Invest in the stock market: 9%
- Splurge on something I’ve been wanting: 8%
- Book a vacation: 8%
- Donate to charity: 3%
- Other: 3%