Robert Farrington is a paid influencer for CIT Bank. All opinions and advice are his own.
It’s almost tax season, and if you’re expecting a refund, it’s essential that you put that money to good use! With all the changes of tax reform this year, we’re hoping more Americans see a bigger refund than in past years.
But with that extra cash comes another choice - what to do with it. Given that about 39% of Americans can’t cover a $1,000 emergency, we think that putting your tax refund into a high yield savings account as an emergency fund is a smart way to go!
So, where can you easily stash your cash? We love CIT Bank’s Savings Builder, and let me share with you why.
If you want to skip everything and get started, open a Savings Builder Account here >>
Your Tax Refund
According to the IRS, the average tax refund is about $3,000. That’s a lot of money for most Americans, and it’s the perfect starting point to improve your financial future.
If you’re expecting a refund, it’s best to file your taxes early so you can get your money as fast as possible.
When filing your taxes, the fastest way to get your refund is to eFile, and then set up direct deposit into your savings account. If you request a check to be mailed to you, you could be waiting an extra couple of weeks.
With a Savings Builder account, all you need to do is get your account number and routing number, and provide that when you file your taxes! Then, your tax refund can be deposited right into your account! It’s that easy!
What To Look For In A Savings Account
So, you need a savings account… but where? We have a few main criteria for finding a great savings account:
That’s why we love the Savings Builder account. It’s easy to use and setup online (you can do it in minutes). It has a high interest rate (right now it's 0.95% APY), and it has simple ways to ensure that you can get that rate.
Unlike other banks that require a huge deposit, with the Savings Builder account, you can their top rate by either depositing $25,000, OR (and this is the easier option we think) depositing at least $100 every month.
So, if you use your tax return to jumpstart your account, you can keep the high interest rate by simply depositing $100 or more each month.
And if that sounds challenging, you can still be earning approximately 1.10% APY if you miss a month. The 110% APY takes effect the month following the missed deposit. That’s still higher than average! However, if you make a deposit the month you are earning 1.10% APY, you’ll climb back up to 0.95% APY the following month.
The bottom line is you can’t lose. Just go online, open a CIT Bank Savings Builder Account, and start saving.
Use Your Tax Refund As A Tool To Jumpstart Your Finances
Getting a tax refund is huge, but using it as a tool to improve your financial life is even better. That’s why we advocate saving your refund!
But even more importantly, you should focus on improving your mindset around saving - and that’s where the Savings Builder account can also help.
Since you have to make a $100 deposit each month to maintain the higher interest rate - you can make it a goal to put away $100 each month this year. And by doing so, you get a reward - double the interest (ok, a little more than double) in your Savings Builder account.
Check this out. If you simply deposit $1,000 once (your tax refund), you’d earn about $12 on that money in the first year. So, your ending account balance in one year would be about $1,012. Note: this assumes you earn the higher interest rate in month one, and the lower interest rate for the next eleven months.
But… if you opened with $1,000 and then saved $100 per month, you would earn about $41 in interest and your final account balance would be $2,241 at the end of year one. This assumes you earn the higher interest amount for all twelve months.
That’s a huge difference for just having the small goal of $100 per month!
Putting good use to your tax return can go a long way to improving your financial future. But continuing to save throughout the year is even more important. That’s what will help you build real wealth over time.
Consider using a tool like CIT Bank’s Savings Builder Account to really help you save, and boost the return on your savings account. It’s super easy to setup and get started, and you can start seeing the results pretty quickly!
Make 2020 the year that you decide to stop being average and start improving your financial future!
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.