Consumers Using Tax Refunds to Pay Down Debt and Save this Year
More Americans than ever plan to hold on to their tax refunds this year rather than spending the money they get from the IRS, according to the annual tax refund survey released by the National Retail Federation and Prosper Insights & Analytics. This is good news for banks and credit unions!
“Tax return season is a time when consumers plan and prioritize financially, whether it is paying down debt or saving for a rainy day,” NRF President and CEO Matthew Shay said. “With the passage of tax reform and the expectation of more disposable income, we expect to see consumers prioritizing how and when they spend their hard earned dollars, especially during the back-to-school and holiday seasons.”
Of the 65 percent of taxpayers expecting a refund, 49 percent say they will put it into savings. That’s up from 48 percent last year and the highest level in the 12-year history of the survey. Meanwhile, 35 percent will pay down debt, in line with last year and the lowest level since 2016 — all far below the peak of 48 percent seen during the recession in 2009.
This savings attitude falls in line with AudienceSCAN findings: 32.8% of U.S. adults want to increase savings and / or reduce debt in 2018.
Only 22 percent will spend this year’s refunds on everyday expenses, the second-lowest level in survey history after last year’s 21 percent. Beyond that, 12 percent will use the money for a vacation; 10 percent will “splurge” on dining out, trips to a spa or apparel; 9 percent will invest in home improvements; and 8 percent will make major purchases ranging from a television or furniture to a car.
It's interesting for businesses to note that even though there's a strong saving mentality, those same savers are still willing to put some money toward trips this year. The newest AudienceSCAN survey showed 41% are planning trips to the beach, and 28% will visit state/national parks.
“Younger consumers are being more mindful about their hard-earned money, especially those 18–24 who have already filed their taxes this year, higher than any other age group,” Prosper Executive Vice President of Strategy Phil Rist said. “Although this group is focused on allocating a portion of their refunds to savings, they are also more likely to use them for everyday expenses compared with any other age group.”
Retailers can reach out to young savers through social media. The latest AudienceSCAN study reported 50% of Those Who Want to Increase Savings took action after seeing ads on social networks in the past year.
According to the survey, 67 percent of Americans file their taxes online, with 39 percent using computer software, 20 percent hiring an accountant, 17 percent going to a tax preparation service, 14 percent preparing their taxes manually and 9 percent seeking help from a spouse, friend or relative. Among those using a tax preparation service, consumers are spending $5.7 billion on tax services — an average $132.93 per person, up slightly from last year’s $131.66.
Of those surveyed, 59 percent have already filed their taxes or expected do to so by the end of February while 27 percent will file in March and 14 percent in April.
AudienceSCAN data is available for your applications and dashboards through the SalesFuel API. Media companies and agencies can access AudienceSCAN data through the AudienceSCAN Reports in AdMall.