Tax season is in full swing. According to the IRS, as of February 17, 2017 it had received over 42.5 million tax returns and had processed more than 32.9 million refunds totaling $103.2 billion. The average refund is worth $3,137.

So, if some of that IRS cash came your way, what would you do with it? Spend it? Or save it?

Cash Caches

Saving still wins. According to a survey of over 7,600 people conducted by National Retail Federation and Prosper Insight & Analytics, the largest number of people – 48% of survey respondents – say they will be saving their tax refund, lower than 49.1% in the previous year but still higher than the 46.9% figure in 2015. 

And when it comes to "spending," practicality also wins out: The next highest group, 35.5% of those surveyed, will spend the money from their tax refund paying down their debts, compared to 34.9% last year. In recent years, that number has been even higher, averaging 37.6% in the past five years and reaching its highest level in a decade in 2009 at 48%.

“Financial security continues to be top-of-mind for all Americans, and consumers are hanging on to their tax refunds tighter than ever,” NRF President and CEO Matthew Shay said in a statement.

This conservatism and spending prudence is in line with the decline in Conference Board’s Consumer Confidence Index in January 2017, driven by concerns about business conditions, jobs and income prospects. 

Where Else Do Refunds Go?

And that means the purse strings are getting tighter when it comes to expenses.

Splurging on fancy dining out, clothes or spa treatments continues to drop. Only 7.6% are expected to use their refund money to indulge themselves, as opposed to 8.3% last year. Also down is using it to fund a vacation: 10.7% of people plan to use their cash that way,  the lowest since 2013. Typically this number has been higher, peaking at 13% in 2015 and averaging 11.7% in the past decade.

Also continuing to drop: use of refunds for major purchases such as televisions, cars or furniture. Just 8.7% people will spend their refund on big-ticket items this year,  compared to 9.2% in the previous year. That number has been steadily declining over the past four years, but the figure for 2017 is the lowest.


Even in spending, practicality wins the day: 20.9% of the survey population expects to spend their refund cash on everyday expenses – the third most popular use for refunds. That's the lowest in over a decade that has seen an average of 26.9%.  Unmet daily needs hit high points in 2011 and 2013, when this category spiked to 29.7%. For more ideas, see 3 Ways to Invest Your Tax Refund.

What This Means for Retailers

Holding on to this extra cash may mean people are spending less for now, but the National Retail Federation claims it isn't worried. 

"Consumers are leveraging their tax returns to build up their savings, but that's good news in the long run because money saved today is money that can be spent down the road, particularly during the back-to-school and holiday seasons later this year," Shay said. 

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