Here’s the No. 1 thing Americans do with their tax refund

Tax filing season certainly isn’t at the top of most people’s list of fun things to do. But for most taxpayers, there is something to look forward to each spring: a refund.

According to the IRS, the average refund has been close to $3,000 in recent years — which is a pretty hefty hunk of change. In fact, you could do a lot with that much money.

To find out how Americans will spend their windfall, GOBankingRates surveyed more than 5,000 adults across the U.S. We asked, “What do you plan on doing with your tax refund?” Respondents could choose one of eight answers:

– I do not receive a tax refund
– Make a major purchase (necessity)
– Pay off debt (loans, credit card, etc.)
– Put money in savings
– Put money toward a vacation
– Splurge on a purchase (luxury)
– None
– Other

Find out how taxpayers who do expect to get money back from the government will spend it and how to put your refund to work for you.

One-Third Don’t Even Expect a Tax Refund

The survey found that 36 percent of respondents said they don’t expect to receive a tax refund this year. This is close to the number that the IRS expects won’t receive a refund, which is about 30 percent.

Not getting a refund isn’t necessarily a bad thing. If you don’t get a refund, it means you had the proper amount of tax withheld from your paycheck during the year rather than too much — which results in a refund. In fact, taxpayers who regularly get a large refund should fill out a Form W-4 to adjust their withholding and hang on to more of each paycheck.

The majority of taxpayers do expect to get a refund this year, the survey found. Our analysis of how they will spend that money focuses only on answers from respondents who expect to get money back from Uncle Sam.

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43% of Americans Plan to Put Their Tax Refunds in Savings

According to the survey, most taxpayers who expect to receive a refund plan to be responsible with the money, with nearly 43 percent saying they will put the money into savings. That’s encouraging, considering that another GOBankingRates survey found that more than half of Americans have less than $1,000 stashed away.

Another 36 percent said they will use the money to pay off debt. Given that another GOBankingRates survey found that debt is the No. 1 source of financial stress in America, it makes sense that such a large percentage of taxpayers plan to pay off what they owe with their refund.

Just 10 percent of taxpayers plan to use their refund to pay for a vacation. An even smaller percentage — about 6 percent — said they’ll use the money to splurge on a purchase.

The least common way taxpayers will spend their refund is on a major purchase that’s a necessity — with just 5 percent of respondents choosing this answer.

Women Are More Likely to Pay Off Debt

The survey found that women are more likely than men to use their refund to pay off debt. About 40 percent of women said they’ll put refund money toward debt compared with about 33 percent of men. That’s almost equal to the percentage of women who plan on putting their refund into savings — 42 percent.

This doesn’t mean, though, that women are more likely to have debt. In fact, another GOBankingRates survey found that men are deeper in debt. On average, they owe three times as much as women do.

Millennials Plan to Be Responsible With Their Tax Refunds

The most common thing all age groups except Generation X plan to do with their refunds is save the money. Adults 65 and older are most likely to put their refund money into savings, with 53 percent of respondents in this age group choosing this option.

Younger millennials ages 18 to 24 are slightly more likely than older millennials ages 25 to 34 to save their refund — 43 percent versus 40 percent. However, younger millennials also are more likely than any other age group to use their refund for a splurge. And, more than 30 percent of all millennials plan to pay off their debt.

Gen Xers are more likely to use their refunds to pay off debt than for any other purpose. It’s not surprising, considering that another GOBankingRates survey found that older Gen Xers ages 45 to 54 have the highest average amount of debt of any generation.

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How Should You Spend Your Tax Refund?

It’s easy to think of a tax refund as free money, but it’s not. It’s money that you let the government hang on to interest-free all year. So you, should make the most of it when you get it back rather than blow it.

Create an emergency fund: A GOBankingRates survey found that most Americans don’t have enough money to cover major emergencies. Stashing your refund in a savings account can be a great way to build an emergency fund so you don’t have to rely on credit to cover unexpected expenses.

Open a Roth IRA: Take steps now to reduce your tax bill in retirement by investing in a Roth IRA. In 2018, you can contribute up to $5,500 to a Roth — $6,500 if you’re 50 or older. Then you can withdraw money from the Roth tax-free in retirement.

Pay off debt: Make 2018 the year you get out of debt by using your refund to help pay off what you owe. Focus first on paying off debts such as credit cards with higher interest rates to reduce the total amount you pay.

Invest in yourself: One of the biggest financial fears for most Americans is living paycheck to paycheck, a GOBankingRates survey found. If you’re stuck in this cycle, you might be able to break it by taking steps to climb the career ladder and make more money.

You can use your refund to hire a career coach, take courses online to improve your skills, attend conferences or join networking groups, or even launch your own business.

Up Next: 20 Smart Things to Do With Your Tax Refund

Methodology: GOBankingRates conducted this poll through a Google Consumer Survey from Jan. 23, 2018, to Jan. 25, 2018, and collected 5,086 responses. The poll posed the question, “What do you plan on doing with your tax refund?” and allowed respondents to select one of the following responses, which were displayed randomly: 1) “I do not receive a tax refund,” 2) “Make a major purchase (necessity),” 3) “Pay off debt (loans, credit cards, etc.),” 4) “Put the money in savings,” 5) “Put the money toward a vacation,” or 6) “Splurge on a purchase (luxury).” Respondents could also choose “none” or “other.” This survey is representative of the online U.S. population with a margin of error of 4 percent.