An income tax refund may be the biggest check some people see all year. That makes tax season a great time to jump-start a savings plan, financial experts say.
"Tax time is a critical moment, especially for vulnerable consumers," said Brian Gilmore, senior innovation manager at Commonwealth, a nonprofit in Boston that focuses on helping people improve their financial security.
Although the economy is humming and unemployment remains low, many people still are not setting aside much cash in savings.
About one in five workers in a survey by the personal finance website Bankrate, published this week, reported not saving any income. And although financial advisers typically urge people to keep enough savings to pay six months of bills, recent research by the Pew Charitable Trusts found that about two in five households lacked the cash to cover a $2,000 expense. The Federal Reserve's Economic Well-Being report for 2016 found that 44 percent of adults either could not pay an unexpected $400 expense or would borrow or sell something to do so.
The average federal tax refund last year was about $2,900, according to the Internal Revenue Service. To encourage people to save at least a portion of that sum, Commonwealth has teamed up with America Saves, a Consumer Federation of America initiative, to promote the "Save Your Refund" campaign.
Participants agree to deposit all or part of their refunds in a savings or retirement account, or to buy savings bonds. In exchange, they qualify for the chance to win cash prizes. Because many people use part of their refund to pay bills or credit card debt, Mr. Gilmore said, the minimum amount that Save Your Refund participants must agree to save is just $50.