Saving money is not always easy, but having some savings provides people with the security needed to withstand economic shocks and plan for their future. Many people save automatically through a workplace retirement plan or by directly depositing money out of each paycheck into a savings account. But according to the Pew Charitable Trusts, more than 40 percent of all workers do not have access to a workplace retirement saving plan. Many more do not earn enough money to save on a regular basis even if they have access to a savings plan.
It is clear that consumers recognize that a lack of savings puts them at risk. In the Bureau’s survey of financial well-being in America, which measured how consumers perceived their financial well-being based on a variety of factors in their lives, “disparities in financial well-being (were) greatest between subgroups that had different levels of liquid savings.”
Tax time is one time during the year when lower-income consumers have an increased opportunity to save. According to the IRS, approximately 75 percent of all people filing returns receive a tax refund and the percentage of people with lower incomes receiving a refund is more than 80 percent. For many low-wage workers their tax refund represents the largest lump sum of money they will receive all year.
To make it possible for people to automatically save, the IRS offers tax filers the opportunity to directly deposit their refund in up to three separate accounts. This means they can put some of their refund into their checking account to pay for current expenses and also set some aside for medium- or long-term savings goals.
For the past six years the Bureau has encouraged saving at tax time by offering support to the network of Volunteer Income Tax Assistance (VITA) providers that offer free tax help in communities around the country. The Bureau also offers its tools, training, and technical assistance to the companies in the commercial tax preparation industry. Through this initiative the Bureau has identified a number of practices and approaches used by tax preparation providers to encourage their customers and clients to save.
As part of this ongoing initiative, the Bureau is releasing its latest report summarizing results of the 2018 tax season and expanding on information regarding best and promising practices to encourage saving at tax time. In this report you will also find information on:
Learn more in the Bureau’s paper “Building a brighter future by saving at tax time.”
This article by was distributed by the Personal Finance Syndication Network.