UACES Facebook TAX TIME: Survey finds adults more likely to save than splurge with tax refund
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TAX TIME: Survey finds adults more likely to save than splurge with tax refund

By Mary Hightower
U of A System Division of Agriculture
Feb. 19, 2016

Fast Facts:

  • Survey: 28 percent of adults would pay down debt with windfall
  • Survey: 2 percent would splurge with windfall 

(556 words)

LITTLE ROCK – When tax time turns into a refund windfall, adults are more likely to use the money to save or pay down debt than to go on a spending spree, a survey by the National Endowment for Financial Education finds. 

“If you came across $1,000 free and clear, you’d think the first instinct might be to run to the racetrack,” said Laura Hendrix, assistant professor and financial management specialist with the University of Arkansas System Division of Agriculture. 

However, “two-thirds of U.S. adults would put that $1,000 into savings,” she said. “28 percent would pay down debt and only 2 percent would use it to splurge on something, according to the survey.” 

Hendrix said that tax season is the time when many people can expect $1,000, or more, free and clear. The average refund last year was $2,797 and 70 percent of filers received refunds.  

She offers five ways to make the most of your tax refund savings:

  1. Build an emergency fund.  Aim for enough money to cover at least two to six months of expenses. An emergency fund can cover unexpected financial needs such as car repair bills, medical emergency or job loss. A tax refund can be a giant step toward reaching the savings goal for your emergency fund.

  2. Save for retirement. “Most Americans aren’t saving enough for retirement and you can have all or part of your tax refund deposited into an IRA,” Hendrix said. As an added bonus, retirement savings contributions may provide tax benefits for the next year. “By saving for retirement you give yourself the gift of a financially secure future.”

  3. Add principal to your mortgage payment. Even small increase in the principal can add up to big savings. “Paying down the principal saves money on interest and reduces the number of years you’ll be paying a mortgage,” she said. “Be sure to designate on your check or auto-payment that the additional money is to go toward the principal of the loan. You can save thousands of dollars in interest and take years off of your mortgage loan.”

  4. Pay down debt. Save interest and free up monthly budget. “Use at least part of your refund to make additional payments on any debt that you owe,” Hendrix said.  “Get those pesky payments off your back and save money on interest. Pay off or decrease credit card debt. For example, a $3,000 balance at 14.4% with a minimum monthly payment of $90 would take 11 years to pay off and cost more than $1,000 in interest charges. “Paying down debt frees up breathing room in your monthly budget.”

  5. Make saving easy. Use IRS Form 8888 to direct deposit part of all of the incoming tax refund into up to three bank or credit union accounts; including an IRA. “If you use  IRS Form 8888 you can register to win cash prizes at,”she said. Save at least $50 and qualify to enter the Save Your Refund contest. There are weekly prize drawings and a grand prize of $25,000. Sign up at  Save Your Refund is a promotional campaign sponsored and funded by two nonprofit organizations - America Saves and Doorways to Dreams. “The purpose of the Save Your Refund campaign is to inspire tax filers to save all or part of their refund,” Hendrix said. 

For more information financial management, contact your county extension office or visit


The University of Arkansas System Division of Agriculture offers all its Extension and Research programs and services without regard to race, color, sex, gender identity, sexual orientation, national origin, religion, age, disability, marital or veteran status, genetic information, or any other legally protected status, and is an Affirmative Action/Equal Opportunity Employer.  

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Media Contact: Mary Hightower
Dir. of Communication Services
U of A Division of Agriculture
Cooperative Extension Service
(501) 671-2126

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