Tax Time is the Perfect Time to Save
Editor's Note: this post originally appeared as part of a series for National Consumer Protection Week on ConsumerFinance.gov.
Filing taxes doesn’t have to be the worst. For some, tax time can offer an opportunity to set some money aside for goals or a rainy day.
The Earned Income Tax Credit (EITC) is a refundable tax credit for low to moderate income working individuals and families. EITC can even reduce taxes and result in a refund. Last year, over 27 million consumers received nearly $62 billion in EITC.
Many people who are eligible for free tax services, for example, at IRS-approved Volunteer Income Tax Assistant (VITA) sites, pay to have their taxes prepared. Money saved by using free tax prep, added to part of a refund, could go right into a savings account or be used to pay down debt.
In addition to taking advantage of free tax services, there are many other ways to save. You can save automatically by having a portion of your refund or your paycheck deposited directly to a savings account.
Saving is hard, but a cushion can give you the ability to say “no” to expensive financial products .
For some, information and knowledge in a transparent market is enough to ensure they’re able to choose the best option. But for others, it comes down to having enough money to avoid more expensive products and services . Income alone is often not enough to ensure access to an affordable and beneficial choice, especially for people who are low-income or economically vulnerable.
Everyone’s financial situation is different. Whether you are saving for your next car repair, a month's rent, or for a personal goal, you are taking the first step to expand your choices by setting savings aside. The power to say "no, thanks" to high-cost products can be one of the most powerful consumer protections of all.