EXPECTING A TAX REFUND THIS YEAR? - CCCS OF MD & DE SAYS, "MAKE IT WORK FOR YOU!"

According to the IRS, more than 31 million Americans have qualified for refunds so far this tax season, with an average pay out of $3,211. If you’re among this lucky group, you have the chance to do something exceptional.  By using your refund wisely, you have a unique opportunity to improve your finances and increase your quality of life. 

Devon Hyde, Manager of Resource Development for national nonprofit Consumer Credit Counseling Service of Maryland and Delaware (CCCS), says, “For many people, a tax refund represents the largest influx of cash they’ll see all year. It’s almost like having an unplanned paycheck. Suddenly having this much money in hand can be tempting, but it also offers an amazing chance to become more financially secure.”

Preeti Mehta, Director of Project Incubation at the Doorways to Dreams Fund (D2D), agrees.  Mehta, who leads D2D’s Tax Time Savings work, says a refund makes it possible to achieve multiple financial goals, such as paying bills, repaying debt, and most importantly, building savings.

Why is saving so important? CCCS of MD & DE Reservist Volunteer Dan Florea says it all comes down to peace of mind. “If you normally live paycheck-to-paycheck, having an emergency savings fund gives you a much needed cushion.  It means the next time the car battery dies and has to be replaced, you don’t have to worry. You know you’ll be able to get to work and pick up your kids from daycare, because you have the money in the bank to pay for this repair.”

The Money School Program Director Quadia Muhammad says consumers who have an emergency savings fund behave differently from those without a safety net.  “When emergencies strike -- and they always do -- people who don’t have savings can only react.  They’re forced to borrow from family members or friends, request an advance at work, or take out a high-interest payday loan. Those who have a nest egg don’t react -- they respond.  Having savings reduces their stress and places them in control of their lives.”

Saving regularly also allows us to achieve major financial goals like paying for our retirement or our children’s educations. With that said, many of us still don’t save.  Why is this?  Hyde believes there are many reasons. “Most of us recognize the value of saving,” she notes, “but we may procrastinate and think to ourselves ‘I’ll do it later.’ It’s easy to confuse intent with action.”  

Florea says many consumers don’t save because they simply haven’t learned the habit. “If you put all your money into checking, you see it sitting there, and before long, it’s gone.  But if you pay yourself first by having a certain amount directly deposited from your paycheck into a separate account, you aren’t as aware it’s there. Once it begins to accumulate, something beautiful happens: You suddenly realize you’re making progress, and this may motivate you to save even more.”

But what if you don’t think you earn enough to save? Muhammad says, “Take heart. Even small contributions add up over time. Consider the story of Oseola McCarty.”  Ms. McCarty was born in the early 1900’s and worked her whole life as a laundress.  Although she made a very small wage, she stuck to a budget and regularly put money away. When she retired, she had a $150,000 nest egg that she used to establish a scholarship trust fund at University of Southern Mississippi. “Ms. McCarty’s story inspires us to realize we all can do this!”

Mehta emphasizes that tax time offers a golden “savings moment” for consumers on limited budgets.  To help them begin saving, D2D has developed an innovative incentive program known as SaveYour Refund that makes it possible for taxpayers to win one of 10 $100 weekly prices or a $25,000 grand prize. To participate in the contest, taxpayers must first: 

• Fill out a Form 8888 (Allocation of Refund) when they file their tax returns. This form is simple to fill out. It allows you to divvy up your refund into different accounts (checking, savings, IRA, CD, etc.)  You can also use a portion of your refund to purchase a U.S. Saving Bond for yourself or someone you love.

• Complete and submit a short form on the SaveYourRefund website.

• Post a photo to the Save Your Refund website in order to qualify for the grand prize.

Mehta notes, “D2D created this program to help people recognize that saving can be empowering and FUN.” Other organizations recognize the importance of providing savings education and support. CCCS of MD & DE presents savings workshops throughout the local communities it serves and has a free savings and investment calculator on its website. The Money School likewise offers a variety of savings-related education, including the 52-Week Money Saving Challenge.  

Studies show that consumers on limited incomes often lack access to quality savings products.  To help address this need, CCCS of MD & DE has joined with PNC Bank to create the Encouragement to Economic Self Sufficiency (EESS) initiative.  This innovative pilot program helps low-to-moderate income residents in Baltimore City and Baltimore County learn to save.

The EESS savings account is truly unique.  It gives clients the chance to save a minimum of $10 a month without requiring them to keep a minimum balance or charging them a monthly fee. When clients enroll in the program, the amount they choose to save each month is added to their regular CCCS debt management plan (DMP) payment.  The agency then distributes the savings to their PNC savings account the same way it distributes their DMP payment to their creditors. 

Florea says this approach helps clients get into the habit of saving regularly. “Clients get excited when they see their savings start to grow. They’re even happier the first time they encounter a financial setback and realize they have the resources to deal with it. The peace and independence they experience motivates them to make saving a way of life.” 

In time CCCS hopes to expand the EESS effort. To learn more about this program, please contact Dan Florea at 410-747-7414 X 3051.  To schedule an appointment with CCCS for free, confidential budget or credit counseling, call 1-800-642-2227.  To learn more about the agency’s services, visit the CCCS website. If you’re fortunate enough to get a refund, don’t forget to save!

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Consumer Credit Counseling Service of MD & DE, Inc. (CCCS) is an accredited 501(c)(3) nonprofit agency that helps stabilize communities by creating hope and promoting economic self-sufficiency to individuals and families through financial education and counseling.  CCCS MD State License #14-01