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.
Interest rates have also come up significantly since the pandemic making it easier to earn passive income by receiving interest payments.
A Great Place To Put Your Savings
One of the best places to save your tax refund is to open a Savings Connect Account with CIT Bank. Given they are an online-only bank, they have fewer overhead expenses. As a result, they can provide much higher savings rates to you.
Their best offering is the high yielding CIT Platinum Savings account for balances of $5k+. CIT also offers a competitive Savings Connect account with no balance minimum, only a low $100 minimum initial deposit. This compares favorably with many traditional bricks and mortar banks that are only offering ~0.01%.
You can also earn competitive rates through term-CDs with CIT Bank. They offer various CD durations and even 11-month-No-Penalty CDs as well.
The Average Tax Refund Amount
According to the IRS, the average tax refund is about $3,500. 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, followed by October 15 if you need to file an extension.
The only times this varies is if the 15th falls on a weekend in which case the deadline is shifted to the Monday after. Or, in unforeseen and special circumstances, like natural disasters or the global pandemic when the April deadline was moved to July 15, 2020.
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 stuck waiting an extra couple of weeks.
With a Platinum Savings or a Savings Connect account, all you need to do is provide your account number and routing number 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.
Just be sure not to wait until the last minute to file. The last thing you want is to get stuck in a technical glitch when customer service is unavailable, miss the filing, and get pinged with a late fee from the IRS.
CIT Bank Savings Connect Has These Features
The best savings accounts have the following features:
- Easy to use and access your money
- High interest rate/APY
- No hidden fees
That’s why I like CIT Bank's Savings Connect account — it’s easy to use and setup online in just a matter of minutes.
Unlike other banks that require a huge starting balance, the Savings Connect account also has a low $100 minimum initial deposit.
Since the Federal Reserve finally started raising rates in 2022, savings accounts, money market accounts, and CDs are much more attractive.
US Treasury bonds are also a great alternative investment. Everybody should be taking advantage of higher rates now and locking in a win.
Locking In Higher Interest Rates With CIT Bank Savings Connect
Below is a chart that shows I took advantage of higher interest rates back on 7/16/2018. At that time, 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.
After the Fed has hiked rates aggressively, you can now earn much higher interest rates. After the pandemic, it is evident that Americans can save a lot more money if we want to. When times or difficult or uncertain, we can save, as evidenced by the 33% saving rate in April 2020.
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 steadily paid about $190 a month in interest income for a cumulate return of $1,038 in just 4.5 months.
Even when rates came down post rate cut, I still kept a portion of my investment portfolio in short-term CDs and a high-yield savings account where there is NO LOCK UP.
CIT Bank has the highest rates in the market and I love the full flexibility to withdraw funds as I see fit.
Save With CIT Bank Savings Connect
Good personal finance fundamentals always starts with savings.
For example, if you deposit $1,000 once (your tax refund) in a high-yielding savings account like CIT Bank's Platinum Savings account, you could earn about $40 on that money in the first year. So, your ending account balance in one year would be around $1,040.
But you can do better. If you open a savings account with $1,000 and then save an additional $100 per month, you could have over $2,200 at the end of year one. This assumes you'd earn a high interest amount for all twelve months.
In other words, it’s great to adopt a disciplined habit of saving each month. If the amount you’re saving each month doesn’t hurt, you’re not saving enough! Definitely read this post to get inspired, How Much Savings Should I Have Accumulated By Age.
Track Your Net Worth And Grow Your Wealth
I also encourage you to utilize fantastic free digital wealth management tools to track your net worth. You can also easily set financial goals, plan for retirement, and more.
In addition, 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.
Now, check out this chart on saving for retirement. The more you save, the sooner you will be free from work.
Sign up for CIT Bank’s Platinum Savings 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 six-figures a year in passive income. He spends time playing tennis, hanging out with family, and writing online to help others achieve financial freedom. Here's how he'd invest $250,000 of his cash today.