New Haven, Conn., – With 2011 federal tax returns due to the Internal Revenue Service tomorrow, Citizens Bank is encouraging consumers expecting refunds to take a disciplined approach to saving and spending their refunds.
According to the IRS, the average tax refund last year was $2,913. With many taxpayers now anticipating a specific income tax refund date based on their filing software or IRS projections, this is an opportune time to start planning how to make the most of the 2011 income tax refund.
“It is very tempting to think of your refund as a windfall and to spend it quickly,” said Ned Handy, President Citizens Bank and RBS Citizens, Connecticut. “But the extra money also creates a natural opportunity for consumers to weigh how it can be used to address their short-, medium- and long-term financial goals.”
Citizens Bank suggests the following ideas on how to save and spend your tax refund this year:
- Create an emergency fund – Regardless of your financial situation, it is important to have a “rainy day” fund that you can tap for unexpected emergencies such as medical bills or job loss. A good rule-of-thumb is to build up six to nine months’ worth of living expenses for such an emergency.
- Save now for your next vacation – If you are planning a summer vacation, deposit your refund into a savings account. When you take your vacation and the bills come due, you will be glad you had the foresight to set this money aside in advance.
- Open a Certificate of Deposit – If you are building a nest egg, consider opening a certificate of deposit which has a fixed rate and term and allows your money to grow in a safe FDIC-insured account.
- Educational savings – It’s never too early to start saving for your children’s educational future. Some banks (including Citizens Bank) offer special products to help parents and grandparents get an early start on saving for college.
- Home repairs – Use the money to defray the cost of remodeling or home repairs. This may help to address home maintenance issues before they become critical and more costly. It also may increase the value of your home.
- Reduce debt – Use the extra cash to reduce outstanding debt such as credit cards. Try repaying the balances with the highest interest rates first since they drain the most money from your budget.
As a bank that has been helping consumers save since 1871, Citizens Bank offers a variety of unique savings programs that help its customers identify their savings goals and in some cases receive financial rewards from the bank as they make progress toward their goals. Citizens Bank also offers an online resource for all consumers – MoneyHelp®, the bank’s guide to personal finance that can help consumers gain control of their finances. MoneyHelp can be used to develop a household budget, understand credit, plan for life’s most important events and more.