The IRS reports that the average tax refund for this season, so far, is a little more than $3,000. That’s a pretty decent chunk of change. However, even though many taxpayers say that they plan to save their tax refund, this money actually gets spent, according to CNBC.
CNBC’s article claims that, even though many people claim that they will save their refunds, they are likely to spend more than they expected. According to Jonathan Parker, the finance professor quoted in the article, people may not even be aware that they are spending more than they would have otherwise.
Psychologically, a tax refund represents a windfall — money that many taxpayers weren’t necessarily expecting. When a little more than $3,000 is put into your bank account, you just see that your balance is grown, and that might assuage some of your worry and guilt about spending a little extra. So, even though CNBC reports that only 8 percent of consumers say they will spend their refunds on something “fun,” the reality is that many are probably fudging the truth a bit.
According to the CNBC article, 30 percent plan to save the refund and 52 percent say that they will use the money to pay necessary household expenses or reduce their credit card debt. Any of those ideas are good ones for getting back on the right financial track — as long as consumers actually follow through.
What am I doing with my tax refund? For me, it’s a moot point. I owe money. Last year, I had a rare refund and I earmarked it to pay my quarterly taxes, so I didn’t see much benefit from it anyway. What about you? Are you getting a refund? And what will you really spend it on?