By Qiana Torres Flores
Americans are not saving like they used to. According to the Federal Reserve, personal savings rates fluctuated between 14 and 9 percent in the '60s and '70s. Over the past decade, the rate has seldom been over 6 percent. At the beginning of this month the rate was 4.3 percent. Anyone who has endured pricey unexpected events like dead furnaces, fender-benders, or a young one breaking a bone knows the importance of emergency savings. Any one of these events could put financially strapped families into a spiral of debt.
Putting money aside is often not an option, and therefore, not a habit. The Doorways to Dreams Fund, an organization that develops financial products to meet the needs of low-to-moderate income people, is in its second year in leading the Save Your Refund campaign to encourage people nationwide to start the habit of saving at tax time.
In 2007, the IRS introduced Form 8888. This form allowed refund recipients to direct deposit their federal tax refunds into multiple accounts, including checking, savings, and retirement. Soon after, unbeknownst to many, the option to purchase a Series I U.S. Savings Bond was added to the form, allowing those without a bank account to save $50 or more with their refund.
Lawmakers in California, Hawaii and Maryland passed legislation to allow taxpayers to split their state tax refunds between several bank accounts. The Maryland General Assembly enacted a law to add the option to purchase savings bonds for state refund recipients who file electronically in 2013.
The Save Your Refund national campaign rewards those who save $50 or more with their tax refund using Form 8888. After splitting their refund and filing their return, participants enter into the Save Your Refund promotion for a chance to win $100 every week or $25,000 at the end of tax season. The campaign is funded by The Ford Foundation, Inuit, Inc., the Annie E. Casey Foundation and Capital One Investing for Good.
The campaign has partners in 27 states committed to getting the word out about the raffle. Local initiatives including the SaveNow WinLater program in Alabama, SaveNYC in New York and the Tax-Time Savings Project in Texas are also sprouting to offer prizes for individuals to save part of their tax refund. So far Save Your Refund weekly winners include working mothers, college students and full-time workers paying off debt. Their savings habits range from veteran penny pinchers to those who are fairly noncommittal about putting money away.
Last year, more than 700 people nationwide participated, collectively saving more than $690,000. Forty percent of those who did save said they had not planned on putting aside any portion of their refund. More than 2,000 people have entered the Save Your Refund raffle this tax season. Click here to retrieve promotional materials to let your constituents know about this chance to win big for saving a small portion of their tax refund.