When tax refund checks hit mailboxes this year, most people will not be heading out on shopping sprees. They will be paying off their debt instead.
A survey by financial services firm Edward Jones asked people what they plan to do with their tax refunds. They compared demographics and found differences between young and old as well as differences between geographic regions and people with children and without.
However, the main theme of the responses was financial responsibility, as more than half (52%) of all respondents said they plan to use their tax refunds to pay off credit card debt and loans or spend the money on necessary household expenses. Thirty percent said they would save the money, and 8% planned to invest it.
Young and old, spenders and savers
Not surprisingly, young people—those between 18 and 34—are more likely to spend their tax returns on things like clothing, entertainment and restaurants. Twelve percent of them plan to have fun with their money, while only 5% of people over 65 said they would do the same.
When it comes to putting money away in savings, people between 55 and 64 are the biggest savers. Forty-three percent of them said they would squirrel their money away, while only 25% of people between 45 and 54 planned to save their refunds.
Geography, children and wealth
Where people live makes a difference in the way they plan to handle their tax refunds. Folks in the northeast region are the most likely to invest it, with 11% planning to put their money into stocks and other investments. And people living in the western United States are savers, with 35% saying they will save their refunds.
People with kids are more likely to put refunds toward everyday expenses—and the older their kids, the less likely they are to feel they can spare their tax refunds for fun spending. Only 1% of people with teenagers at home plan to spend their tax refunds on entertainment or other fun things. Compare that with 10% of people without children who say they’ll splurge on something when their tax refund comes in.
Wealth also makes a difference. More than geography, age or family size, household income had the biggest influence on the way people plan to spend their tax refunds. People making less than $35,000 per year were the most likely to spend their refunds on necessary expenses (61%). Only 37% of people making more than $100,000 per year said the same. People with incomes between $50,000 and $75,000 are the most likely to invest their refunds, according to the survey.