Tax season is here! Most Americans will receive a tax refund. But unlike most Americans, you aren’t going to spend it on something you don’t need.
Instead, you’re going to put it to good use, such as saving for your future. and if you’re expecting a refund, it’s essential that you put that money to good use!
Given that about 39% of Americans can’t cover a $1,000 emergency, putting your tax refund into a high yield savings account as an emergency fund is a smart way to go, especially since interest rates have gone way up since 2015.
One of the best places to save your tax refund is to open a Savings Builder Account with CIT Bank. Given they are an online bank, they have less overhead expenses. As a result, they can provide much higher savings rates to you.
As of 2020, you can earn 1.45% with your CIT Bank Savings Builder Account. This compares favorably with 0.15% at Citibank and many other banks. Further, the 10-year bond yield is at less than 1%. Take advantage as the rates are subject to change.
The Average Tax Refund Amount
According to the IRS, the average tax refund is about $3,000. That’s a lot of money for most Americans, and it’s the perfect starting point to improve your financial future.
If you’re expecting a refund, it’s best to file your taxes early so you can get your money as fast as possible. April 15 is always the deadline (except for special circumstances like COVID19 in 2020 when the deadline was moved to July 15), followed by October 15 if you plan to file an extension.
When filing your taxes, the fastest way to get your refund is to eFile, and then set up direct deposit into your savings account. If you request a check to be mailed to you, you could be waiting an extra couple of weeks.
With a Savings Builder account, all you need to do is get your account number and routing number, and provide these figures when you file your taxes online. Then, your tax refund can be deposited right into your account.
Hopefully everybody is using a low-cost online software like TurboTax or H&R Block as well. I’ve been using tax software since 2004 and they’ve made it almost dummy proof to use.
CIT Bank Savings Builder Has These Features
The best savings accounts have the following features:
- Easy to use and access your money
That’s why I like the Savings Builder account. It’s easy to use and setup online in just a matter of minutes.
Unlike other banks that require a huge deposit, with the Savings Builder account, you can their top rate by either depositing $25,000 or depositing at least $100 every month.
So, if you use your tax return to jumpstart your account, you can keep the high interest rate by simply depositing $100 or more each month.
What’s great about this the Savings Builder account is that back in 2015, it was paying closer to 0.25%. Everybody should be taking advantage of higher rates now and locking in a win.
Locking In Higher Interest Rates With CIT Bank Savings Builder
Below is a chart that shows I took advantage of higher interest rates back on 7/16/2018. I decided to open up a 12-month CD at 2.25%. It felt wonderful to earn a guaranteed return, especially when the stock market started melting down in 4Q2018.
If I had invested the $100,000 in the stock market on July 16, 2018, it would have been worth only about $90,000.
Instead, the $100,000 has steadily paid about $190 a month in interest income for a cumulate return of $1,038 in just 4.5 months.
Even though rates have come down, I still keep a portion of my investment portfolio in short-term CDs and a CIT Bank Savings Builder Account, where there is NO LOCK UP.
CIT has the highest rates in the market and I love the full flexibility to withdraw the funds as I see fit.
Save With CIT Bank Savings Builder
Good personal finance fundamentals always starts with savings.
If you deposit $1,000 once (your tax refund), you’d earn about $24 on that money in the first year. So, your ending account balance in one year would be about $1,024.
But you can do better. If you opened a savings account with $1,000 and then saved an additional $100 per month, you would earn about $37 in interest and your final account balance would be $2,237 at the end of year one. This assumes you earn the higher interest amount for all twelve months.
In other words, it’s great to adopt a disciplined habit of saving each month. If the amount of you’re saving each month doesn’t hurt, you’re not saving enough!
I encourage you to utilize fantastic free digital wealth management tools to track your net worth, set financial goals, plan for retirement and more. Here’s a handy list of my favorite top financial products that can help you improve your financial health and grow your wealth as well.
Check out this chart on saving for retirement. The more you save, the sooner you will be free from work.
The more you save, the quicker you will be free
Sign up for CIT Bank’s Savings Builder Account to help maximize your savings returns.
A savings account is FDIC-insured up to $250,000 per person and gives you liquidity and peace of mind that your money will be there for you when you need it.
About the Author: Sam started Financial Samurai in 2009 as a way to make sense of the financial crisis. He proceeded to spend the next 13 years after attending The College of William & Mary and UC Berkeley for b-school working at Goldman Sachs and Credit Suisse. He owns properties in San Francisco, Lake Tahoe, and Honolulu and has a total of $810,000 invested in real estate crowdfunding.
In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $220,000 a year in passive income. He spends time playing tennis, hanging out with family, consulting for leading fintech companies and writing online to help others achieve financial freedom.
