PhotoMillions of consumers are eagerly awaiting their income tax refund from the Internal Revenue Service (IRS), while millions more have already received their money.

Economists like to track what consumers do with the money, since it can provide clues about what is going on in the consumer economy. This year,'s survey shows a stark departure from recent trends.

Only 23% will use the money they get back from the government to pay off debts, while 22% will save or invest it. In 2007, just before the financial crisis, 55% said they were going to pay off debt, and 59% planned to save or invest the money.

"Over the 10 years that we have asked people what they will do with their refunds, we've never seen numbers this low for these two important categories," spokesperson Mickey Macedo said in a release.

Following the money

The survey also found that fewer consumers plan to use their refunds for home improvements, vacations, to pay mortgages or education loans, or to make purchases.

"People obviously think that they have better things to do with their money in 2016," Macedo said.

Or maybe, consumers feel like they must use their refunds to meet day-to-day expenses, which would not be a healthy sign. has conducted a similar survey. It found that three out of four consumers expecting a refund plan to use it to pay down existing debt. Just 25% said they planned to put the money into savings.

Just 5% said they planned to make a major purchase like a car or home and only 4% said they would splurge on purchases.


"It's really encouraging to see that most people are planning to use a tax refund to better their financial situation by saving or paying off debt," Elyssa Kirkham, the lead GOBankingRates finance reporter on the study, said in a release. "Using a tax refund this way will buy the taxpayer more financial security and peace of mind, instead of a one-off splurge that soon loses its value or is forgotten."

The survey showed 30% of respondents are not receiving a tax refund, which is actually the best usage of the money. While it is fun to get a nice check in February and March, many consumers lose sight of the fact that the government has been holding onto their money all year, interest free.

True, there aren't many places where you could earn much of a return on your cash, but even in a low-interest savings account, the money would be available to you during the year in an emergency, rather than having to wait for a refund from the government.

Forced savings

Though there is little empirical evidence in this area, chances are consumers want to get a refund because it is a forced savings plan. The money is taken from their paychecks and returned to them in one lump sum.

With interest rates almost nil, many financial advisors now say that's not such a bad thing. No-interest saving is better than no saving at all.

Still, consumers should remember that when they overpay their taxes on each paycheck, they're making an interest-free loan to the government. Maybe if they took home a little more money each month, they wouldn't need a big refund to pay down debt once a year.

You can adjust your withholding at work by adjusting the number of dependents you claim. The IRS Withholding Calculator can help you make the adjustment.

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