In our money mailbag this week, a viewer asks: “I was counting on my tax refund to start my emergency savings account, but I ended up not getting anything back. What are other ways I can kickstart my savings?”
You’re not alone. A third of Yahoo Finance viewers surveyed in our recent tax poll told us that they were expecting a refund, too. But the results this year have caught a lot of filers by surprise.
Tax refunds are having a big financial moment for many American households. A recent JP Morgan report, which analyzed survey results by the National Retail Federation, found that half of respondents hope to boost their savings with their refund, compared to 41% the year prior.
But what most people don’t realize is that anyone can save, no matter how little or how much money you make -- just so long as you start small. If you’re having trouble setting a goal, focus on building up enough for a $400 emergency, then keep building from there.
Another strategy is to try setting up an automatic transfer -- of $50 each week, for example -- to a high-yield savings account. Interest rates for savings accounts have been on the rise, so it’s a great time to get started. Right now, there are plenty of offerings -- especially with online banks -- that offer 2% APY – and that compounds daily. Just make sure the bank you go with is FDIC-insured.
If you’re able to stick to this plan and put away $50 a week, in a little over a year you’ll get to $2,600 -- more than the average refund amount last year. And you’ll have that money no matter what happens to the tax code in the future.
If you’re not sure what you can put away, you can get help from a budgeting app. Some popular options up right now are Digit, Clarity Money, Mint and Qapital, which are all available on iOS and Android devices. Some are free to use, while others have fees associated with them, so choose the one that’s right for your situation.
Have a money question you need answered? Let us know at [email protected].
Follow Ned Ehrbar on Twitter.
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