Leader: Saving tax refund during economic uncertainty can be powerful

For beginners or seasoned savers, saving at tax time can become a ritual, said Derik Farrar, head of consumer deposits at U.S. Bank

With many American households concerned about the potential of a recession and rising costs of goods and services, having a little extra set aside in savings could bring additional peace of mind.

That’s why this year at tax time, U.S. Bank leaders are once again encouraging clients to consider putting as much of their tax refund into savings as possible. Recent data from Talker Research found that while most Americans plan to use their tax refund for essentials including bills, 22% planned to put it into savings and 52% said their tax refund is an important part of their budgeting.

“If you haven’t started saving yet or would like to beef up what you have set aside, tax time can become a ritual for setting aside what you can for the unexpected,” said Derik Farrar, head of consumer deposits at U.S. Bank. “If you are able stow away a bit more, now is an ideal time to do that as interest rates in savings products remain competitive.”

For savers just getting started, setting aside cash in an account separate from your everyday checking account, such as a savings account, can help ensure it’s earmarked for future needs. A common rule of thumb is to aim to keep three to six months of living expenses in savings to cover an unexpected loss of income or financial emergency. 

“How much you should have in your savings account or emergency fund can be an individual preference and comfort level,” Farrar said. “If you are going to aim for that three- to six-months threshold, be sure to factor in payments you may make annually, such as insurance.”

For savers looking to grow their savings, short-term investment products such as certificates of deposits (CDs) and money market accounts (MMAs) offer safe and secure ways to make your money grow. CDs offer a fixed interest rate for a set term, which can be an attractive option if you know for certain you won’t need those funds anytime soon. If you want a little more liquidity, a money market account can also offer competitive rates but with the option to write checks and access funds with no penalty.

“Traditional savings products like CDs and MMAs continue to be a bright spot for consumers in a position to save,” Farrar said.

To learn more about savings opportunities at U.S. Bank, visit usbank.com/savings.