According to a 2016 report from the Federal Reserve Bank, 46 percent of consumers indicated that they either could not pay for an emergency expense of $400, or would need to borrow or sell something to do so. Saving throughout the year can be tough. It may feel like every paycheck is spent before you get it. You might not have access to an easy way to save, like a separate account or automatic deposit from your paycheck.
If you’re going to get a tax refund, it may be the single biggest lump sum you will receive all year. You can take advantage of tax time to prepare yourself for unexpected emergencies, or plan ahead for the future.
Steps you can Take to Save at Tax Time
- Plan in advance to save some part of your tax refund. It’s likely that you already have plans for what to do with your refund — many people do. But, if you can include in your planning to save part of your refund, maybe 25 percent, it could help you down the road when an emergency occurs or you need a little extra cash to meet a financial goal.
- Have a separate account you use to save. There are many options to choose from, including a regular savings account with a bank or credit union, an IRA, a savings bond, or a savings wallet on a prepaid card. Review your options and choose the most convenient way to set aside your savings. Then, set it up in advance so you are ready to use it during tax time.
- Automatically deposit some of your refund into a separate account when you file your return. If you’re receiving a refund, use your tax form to tell the IRS to put the part you need right away into your checking account and the rest into your separate account designated for savings. Don’t forget to take your savings account information with you if you visit a tax preparer or free tax preparation site.
Employee Resources and Benefits to Support your Financial Health
DHS cares about your financial health and has put in place resources to help you “Invest in your Financial Future.” Your Component Employee Assistance Program (EAP) can provide financial and legal consultation services to you and your family.
The Consumer Finanical Protection Bureau developed a resource library to assist you with taking advantage of the tax season to start your emergency fund or to build your nest egg.