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What’s wrong with us? Most Americans not spending refunds


Retailers used to be able to count on Americans spending every penny of their tax refund, but that’s not the case anymore according to new research from the National Retail Federation.

A shift in attitudes about the sudden windfall of cash received from the Internal Revenue Service shows a major turn toward saving and other frugal behaviors. That’s unwelcome news for retailers who have long relied on American’s aversion to saving their refunds for a boost to February and March sales. That seems unlikely this year with NRF data showing that half of those expecting a refund plan to save the money rather than spend it right away – the highest level since NRF has been conducting the survey.

“Consumers are building their spending power and boosting their confidence as they set aside their checks from Uncle Sam,” NRF President and CEO Matthew Shay said. “Americans this year see refund season as a time to improve their financial health by using their refunds to get ahead on savings goals and plan for bigger purchases in the future. Money saved is money waiting to be spent.”

That’s one way to view the results, but in addition to saving, 35% of American’s said they plan to pay down debt, 22.4% will use the refund for everyday expenses and 11.4% plan to book a vacation. There is some hope for retailers though with 9.2% of those expecting a refund planning to make a major purchase like a television or car and 8.3% planning to indulge on a purchase like a salon or spa service or an elaborate night out.

Those most likely to save their refund are young adults, according to NRF, with 57.3% of 18 to 24 year olds planning to save and 27.4% planning to spend the money on groceries, gas and other everyday purchases. Those figures shift a bit in the 25 to 34 year old age bracket and highlight an even greater level of frugality. More than half (52.3%) plan to save their refunds and 45% plan to repay debt.

“Millennials are being wise and putting saving ahead of splurging as they look for ways to get ahead,” Pam Goodfellow, director of Prosper Consumer Insights, the firm that conducted the research for NRF. “Young consumers see their refund as an opportunity to build their savings without making a dent in their monthly budget.”

The suvey was conducted Feb. 2-9 and as with all surveys that measure intent, Americans could behave very differently once they have refund check in hand.

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