How to Save at Tax Time – with Savings Bonds

ALL taxpayers receiving refunds can make an impulsive decision to save by splitting their refund in U.S. Savings Bonds using their tax form. With as little as $50, tax filers can save for themselves or in the name of a loved one in a safe, guaranteed, accessible, and competitive savings instrument.

Moreover, taxpayers can receive the remainder of their refund (the part not saved in a Savings Bond) through a paper check or direct deposit. This means unbanked filers can also save!

Generally, there are three big barriers to saving - having money to save, having access to a good product at the right time, and being motivated and encouraged to save. With this opportunity, two of those obstacles have been removed.

  • Money to Save: At tax time, many Americans receive large refund checks. In tax year 2007, approximately 100 million Americans received a federal tax refund, totaling over $246 billion. Families who make less than $40,000 a year received more than $120 billion in refunds, averaging $1,780 per filer. Because some of this is due to over-withholding taxes each paycheck - many Americans have basically been saving all year long! With this option, now they can funnel that year of savings into an actual savings account with interest.
  • Good Product at the Right Time: Savings bonds are a safe, familiar, government-issued savings vehicle that offers an interest return rate in line with Certificates of Deposit (CD) at banks, but CDs usually require a much higher minimum investment, which puts CDs out of reach for many low-income families. Bonds are also flexible - they can be used towards any savings goal including: education, retirement, or housing.
  • The last challenge is our responsibility to overcome. As a community of savers through America Saves, we HAVE to let every community member know about this opportunity AND commit to saving ourselves as well. The tax preparer industry, both for-profit and non-profit, is critical to this effort as well as they help millions of taxpayers file returns and can offer this opportunity at the right time.

This national policy provides a historic opportunity to increase savings for all Americans and to create an annual savings behavior where tax time isn't just about spending, but also saving. Take advantage of it and encourage those you know to save in a bond as well. This investment compliments an existing savings plan of retirement and 529 accounts as well as helps first-time savers start down a path towards financial security.

For more resources and information on the Savings Bond Campaign, please visit www.bondsmakeiteasy.org

Joanna Smith-Ramani is Director of Strategy for the D2D Fund (Doorways to Dreams), a non-profit organization that seeks to expand access to financial services, especially asset building opportunities, for low-income families by creating, testing and deploying innovative financial products and services.

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