Saving or Spending? What Do You With Windfalls?

I received this press release from ING DIRECT the other day.

AMERICAN TAXPAYERS PLANNING TO SAVE RATHER THAN SPEND

New ING DIRECT Survey Reveals Majority of Americans Receiving a Tax Refund Intend to Use It to Pay Off Debt, Invest or Save

Wilmington, DE – As the tax deadline approaches, many Americans have refunds on their mind. While the arrival of a refund once meant a shopping spree to many, this year Americans are skipping the spring sales to boost their savings and eliminate debt, according to a new survey release by ING DIRECT. The results of the survey report that seven in ten (71 percent) Americans who expect to receive a federal tax refund for 2008 will not be spending, but saving it, investing it or using it to pay off debt.

In these difficult economic times, Americans are also banking on their refunds to put food on the table and pay bills.  More than half (51 percent) of Americans expecting a federal tax refund this year said they are using their federal tax refund to cover basic household expenses, including an alarming 65 percent who are under the age of 35.

“Although Americans are often encouraged to spend their refunds to help stimulate the economy, Americans are choosing to save themselves first.  They strongly believe their top priorities are to stimulate their personal finances and keep the lights on at home. Americans are scaling back and they are doing their part to become more financially responsible citizens,” said Arkadi Kuhlmann, President of ING DIRECT USA, the nation’s largest direct bank. 

With uncertainty in the marketplace, Americans are doing their best to make do and save more money. The ING DIRECT survey also found:

• Almost half (46 percent) of Americans between the ages of 35 to 54 who expect to receive a federal tax refund this year intend to use it to pay off debt;
• One in four Americans expecting a federal tax refund (27 percent) plan to save their refund and one in three (39 percent) will pay off debt with their refund this year;
• For Americans who owe taxes this year, 43 percent stated that they will dip into savings to pay Uncle Sam.

I found there to be a few really interesting points to this press release.

First, that more than 50% of Americans (65% for people under the age of 35) will be using this refund to pay basic bills, in other words, just to survive.

That more than 70% of people who receive a refund won’t be spending it, but will instead be using it to pay off debt or putting it towards savings is encouraging in the sense that people are starting to realize the necessity of saving.

Finally, the point that Americans are trying to become more financially responsible in general is applicable not only to Americans but to people in general. Almost Frugal receives a lot of visitors from around the world, and I see the same desire to save money and learn about frugality from the international visitors as the North American visitors.

This press release was for the American market, but the trends apply to all. Will you be receiving a windfall in the near future? What do you plan to do with it: spend it or save it?