# You’re Getting a Tax Refund! What Should You Do With It?

By: [Team Stash](/content/learn/author/team-stash/index.html)

Published: Apr 09, 2018  
• Updated: Jun 09, 2026

Resist the urge to splurge! Saving or investing that money could take you far

#### In this article:

1. [**What’s everybody else doing?**](/content/learn/youre-getting-a-tax-refund-what-can-you-do-with-it/#whats-everybody-else-doing/index.html)
2. [**Saving is always a good idea**](/content/learn/youre-getting-a-tax-refund-what-can-you-do-with-it/#saving-is-always-a-good-idea/index.html)
3. [**If you must spend, spend smart**](/content/learn/youre-getting-a-tax-refund-what-can-you-do-with-it/#if-you-must-spend-spend-smart/index.html)
4. [**Consider investing what you don’t spend**](/content/learn/youre-getting-a-tax-refund-what-can-you-do-with-it/#consider-investing-what-you-dont-spend/index.html)

For many people, a federal tax refund is the biggest shot in the arm their bank account will receive all year. With average refunds totaling [nearly $3,000](https://www.nytimes.com/2018/03/16/your-money/tax-refund-savings.html), you might be tempted to take that money and splurge.

Be it on a vacation or a shopping spree to pick through the remaining merchandise at [your local Toys ‘R’ Us](/content/learn/toys-r-us-is-closing-heres-what-happened-to-your-favorite-childhood-store/index.html), spending money has a way of making you feel better in the short term.

When you get your check, think about looking further into your future than just your next video game console or a pair of $400 boots.

Chances are your whole life could benefit by bolstering your savings or adding that extra income to your investing or retirement accounts. Think about a down payment on a house. Or a condo on the beach when you’re ready to stop working.

It’s a grown-up move. We think you’re ready to do it.

## What’s everybody else doing?

| Action              | Percentage |
|---------------------|------------|
| Save it             | 43%        |
| Pay off debt        | 36%        |
| Go on vacation      | 10%        |
| Luxury purchase     | 6%         |
| Major, necessary purchase | 5%  |

As it turns out, most Americans do two things with their tax refund, according to recent survey data from GOBankingRates.com: Save it (43%) and use it to pay off debt (36%).

U.S. consumers have a hard time saving. More than half of us save less than 10% of our income annually — and 19% don’t save anything at all, according to a recent [Bankrate survey](https://www.bankrate.com/banking/savings/financial-security-0318/).

Fortunately, splurgers are in the minority. The same data shows that 10% plan to use their refund to take a vacation, while 6% will spend it on a luxury purchase. (A further 5% said they will make a major, necessary purchase, like housing repairs.)

## Saving is always a good idea

Of course, you could always put that money in an emergency fund, especially if you’re just starting to build your savings. A [Federal Reserve report](https://www.federalreserve.gov/publications/files/2016-report-economic-well-being-us-households-201705.pdf), for example, found that 44% of adults couldn’t pay an unexpected $400 expense.

If you’re in this group, you might consider hanging onto your refund rather than upgrading to the latest and greatest Xbox.

## If you must spend, spend smart

Spending isn’t always a bad thing. If you’re receiving a big refund from the IRS this year, you can consider spending it in a way that will improve your financial situation. Paying down debt, for example, will help you in the long run.

Take aim at your [high-interest credit card balances](/content/learn/how-many-credit-cards-really-need/index.html), for starters, or hack away at your student loans. You can also upgrade old appliances for newer, more efficient ones.

If your sanity is at risk, by all means, take a vacation! But consider putting some of that money aside to save or invest.

## Consider investing what you don’t spend

You can always save a part of your refund and still have a little fun. If you were to take half of the average refund this year—around $1,500—and start stashing it away every year, you could potentially have a six-figure nest egg down the road.

Investing in S&P 500 index funds, for example, would’ve netted you [an 8% annualized average](https://dqydj.com/sp-500-return-calculator/) return over the past 30 years.

That would amount to a portfolio worth roughly about [$198,000 today.](https://tools.finra.org/savings_calculator/result?initialSavingsBalance=1500&depositAmountPerPeriod=1500&depositInterval=annually&noOfDeposit=30&annualReturn=8&inflationRate=2&adjustDepositsforInflation=false)

In short, saving or investing your refund may not be as fun as splurging, but it’s the smarter choice for the long-term.