Tax season is upon us, and many college students are celebrating after receiving their tax refund, which seems like a nice bonus after hitting bank accounts.
As SU finance professor Lee Fortenberry said, “There are many who act like they won a small lottery. Therefore, they treat it as a small windfall and will splurge with it [the refund].”
According to USA Today, 80 percent of people who file taxes this year will receive some kind of tax refund. However, data from Principal Financial shows that 30 percent of millennials will blow their tax refunds on consumer products.
Many Shippensburg University students surveyed do not meet the 30 percent of millennials that will frivolously spend their money on material items.
“I put mine in my savings. I like putting any ‘extra’ money I get into my savings account,” junior Keri Barth said. Barth said she uses earnings from working over the winter and summer as spending money instead.
Rather than splurging and spending like many Americans today, Fortenberry strongly recommends people save their tax refunds.
“Currently Americans have the lowest savings rates of the major industrialized countries at approximately 4 percent. Most experts, including the Harvard Business School, agree that it should be closer to 20 percent,” Fortenberry said.
While some students are saving, other students, such as Megan Malinak, a junior communication/journalism major, are putting refund money toward practical expenses. Malinak said she is planning to pay off her credit card bill for the month with the money she receives from the IRS.
As Fortenberry explained, tax refunds are distributed as a result of taxpayers withholding too many taxes throughout the year. When people receive their refunds, the amount they are given back does not include the interest that they would have made on the money if it was in their possession to begin with. While some may find it satisfactory to receive large tax refunds, others may find it more beneficial to not receive a refund at all.
“With a little education, they can adjust their withholding to reduce their refunds,” Fortenberry said.
By receiving a smaller refund, one has access to those funds prior to tax season and may add it to their savings or apply it to their expenses throughout the year. Ultimately, the responsibility lies with taxpayers to make sure they are not overheld on their taxes.