SOURCE: BMO Harris Financial Advisors

April 15, 2014 07:05 ET

BMO Harris Financial Advisors Study: More Than Forty Percent of Those Americans Surveyed Will Use Their Tax Refund to Pay Bills/Reduce Debt

CHICAGO, IL--(Marketwired - Apr 15, 2014) - With just hours to go before the deadline to file 2013 income taxes, BMO Harris Financial Advisors (BHFA) has released a study which found that 42 percent of those Americans surveyed who expect to receive a refund this year will use it to cover household bills or reduce their overall debt load. Last year, according to the Internal Revenue Service, the average individual tax refund received was $2,860.

Americans also plan to use their tax refunds (or a portion of them) to:

  • Save or invest (35 percent)
  • Travel and/or purchase leisure items (16 percent) 
  • Do home renovations (13 percent)
  • Donate to charitable causes (Nine percent)
  • Pay down their mortgage (Eight percent)

"It's encouraging that many of those expecting a tax refund will use the money to reduce personal debt and save or invest for the future," said Mike Miroballi, President, BMO Harris Financial Advisors. "While everyone's personal financial situation differs, making it a priority to save and lower your overall debt load is generally considered wise money management."

BMO Harris Financial Advisors offers the following tips on how to use your tax refund:

Contribute to Your 401(k)
Save for retirement by using a portion of the money to fund your 401(k). This could be done by increasing your contributions and using the refund (or a portion of it) to make up for the resulting shortfall in take home pay.

Manage Credit Card Debt
Pay down credit card debt, beginning with those that carry the highest rate. Consider using a low rate card or reducing your interest charges with a low interest rate option for purchases.

Make a Lump Sum Mortgage Payment
If you have a mortgage, use your tax refund to make a lump sum payment. Applied directly to your principal, a lump sum payment could save you significant dollars in interest costs over the life of the mortgage.

Rainy Day Fund
Having some money set aside in case of emergencies is not only a good financial strategy, it will also help you sleep easier at night. A good rule of thumb is to have at least three months' salary saved as a safety net. If you feel your job might be at risk or you are self-employed, six months might be a better cushion. Your emergency fund should be easily accessible; it should be kept separate from your day-to-day operating account, perhaps in a high interest savings account.

Save for Education
If you are saving for a child's education, consider earmarking some of your tax refund to a 529 Plan. Depending on the state in which you reside and your personal situation, gains in a 529 Plan are not taxed as they grow. When used for qualifying educational expenses, the asset growth in this account is never taxed which allows the funds to be put entirely towards school.

The survey was conducted by Pollara with an online sample of 1,000 Americans 18 years of age and over, between March 7th and March 10th, 2014. A probability sample of this size would be accurate to +/- 3.1%, 19 times out of 20.

About BMO Harris Financial Advisors
BMO Harris Financial Advisors, Inc., offers a comprehensive range of investment advisory products that include financial planning strategies and estate planning strategies to meet the financial needs of high-net-worth clients. Offices are located throughout the U.S. Learn more at

BMO Harris Financial Advisors(SM) is a trade name of BMO Harris Financial Advisors, Inc. Securities, investment advisory services and insurance products are offered through BMO Harris Financial Advisors, Inc. Member FINRA/SIPC. SEC-registered investment adviser. BMO Harris Financial Advisors, Inc. and BMO Harris Bank N.A. are affiliated companies. Securities and insurance products offered are: NOT A DEPOSIT - NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY - NOT GUARANTEED BY ANY BANK - MAY LOSE VALUE.

Estate planning requires legal assistance which BMO Harris Financial Advisors and its affiliates do not provide. Please consult with your legal advisor.

United States Department of Treasury Regulation Circular 230 requires that we notify you that this information is not intended to be tax or legal advice. This information cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer. This information is being used to support the promotion or marketing of the planning strategies discussed herein. BMO Harris Financial Advisors and its affiliates do not provide legal or tax advice to clients. You should review your particular circumstances with your independent legal and tax advisors.

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