A painless way to save - tax refund

[Nantucket]

$100 is 2% of $5000! I am all for saving money but most money market accounts require a substantial initial amount. Also you will not have $5000 to start with so your end result will not be $100 in interest earned! And after income taxes are paid on that less than $100 earned in interest you really have very little. The real issue here is that people want to be able to "save" for their vacation and an account at a bank or credit union gives them too much access to their money so they use the IRS. People realise they do not have the willpower not to touch savings and they can not get at their refund money. Again, to each his own and I think people are very bright to know they could spend some of their vacation savings. A lump sum refund check to pay for Disneyworld is worth much more than the possibilty of an additional $50 dollars in interest IF (and for some people that it is huge if) the money remains in the account. Life has a way of sneaking up on us and for some people it is better to have a "bird in the hand."

 

[friskykitten]

Thanks guys! Not touching it is a problem of mine also as things always come up and you "need" it for something. I know it sounds funny but when we get our refund back it sorta feels like we won the lottery in a way. When else would we make $3000-$5000 in one lump sum. Yet I know the smarter "financial" way is to not let the gov't get it in the first place. We are also considering this year, to claim more expemtions on the W-4 so that we have little or no taxes come out of our paycheck so that we can use it to pay a mortgage (that we don't have yet). Our vacation money would disappear that way but owning a home would be worth having to scrimp for vacation throughout the year.

 

[Disneydenise]

Owning a home is a wonderful thing. I can't imagine trying to do that at my age. We scrimped and saved and did without when the kids were little. I did't even mind not taking a vaction then. I had a little house that was easy to keep clean and 2 babies and a husband in graduate school. I haven't had a real job since the kids were born. I wouldn't do it any other way. I have been using our tax refund for the trip since DD was 4. She turned 17 yesterday. I know that we will not be able to keep doing this trip forever and thats okay. She is looking at colleges that are going to be about $28,000 a year. OMG DS is only a freshmen is HS and what a year it has been. I am glad that I have been able to be here when he gets home for so many reasons I can't even go into. Our trip to WDW has been something that we have always looked forward to and I hope to get a few more with just our family but I know that it is coming to an end soon. I can always go to work when DS finally gets to be more human and has some amount of commonsense. So I have my ressies and I think the refund is going to cover it. We may have to watch what we are spending but heck I don't care. They are going to grow up and not want to go anymore and that is how it should be so. No big savings account for me. I hope I can have the energy I will need when I have grandchildren and then I will have plenty of money too.

 

[PamOKW]

Bumping in hopes Nuthut will share his ideas.

I'm pretty new at the concept of getting a refund rather than having to pay so I'm not entirely sure how to advise on this one. Money market accounts should be available for $2,500. You could also consider an account like a Holiday account (used to be called Christmas Club) these let you save for something specific. It's true that all bank accounts are going to be low interest for smaller (relatively) amounts of money but it's better than no interest.
You could start an account with this year's refund and build on that towards your next trip or whatever you are saving for.

I respect people who enjoy getting that refund and I'm not looking to burst bubbles. Just trying to help others figure out how to squeeze out every penny we can. I'd like ideas too!

 

[Nantucket]

For those of us who do not have the discipline to leave our savings untouched a small amount of interest earned is not the issue. When a car needs repairing or tuition needs to be paid we may "touch" our vacation savings. To insure we get to Disneyworld we "rely" on the IRS to keep our money from us. It may not logically be the best way to save - but for some it is the only way to save. Better to go on vacation without the $50 (possible) of interest in our pockets than to risk not be able to go at all!! Should we be more disciplined, maybe. But we are very wise to know ourselves. And as the person wrote a few postings ago, we get tired of saving for retirement and college so we galdly give up a few dollars of interest to go see Mickey! Oh -and the person who is saving for the house, that is so important and among the best of goals- good luck to you!

 

[friskykitten]

Part of the fun too, is estimating what your refund might be and dreaming up ways to spend or save it. One year it may be Disney, the next year we decide we are going to be really structured and save up the next six years of refunds and put a downpayment on a home, the next year we say forget waiting six years and wait only two and live in a double-wide instead, etc, etc, etc. What I really should be doing is putting it into retirement but.......... <IMG WIDTH="15" HEIGHT="15" SRC="/infopop/emoticons/icon_redface.gif" alt="red face">

What I really need if for hubby to get a HUGE raise!! Won't happen!!

PamOKW--thanks, I have have followed your posts on the DVC board! Our Christmas Club account earns about .5% more than our savings so it is a little better and one I hadn't considered. The best thing would be to save one years refund to open a money market and then go from there. But I have already spent this years refund....shame, shame! Now that we are DVC members we are already paying for our trip throughout the year with the mortgage. Then all we need to save for is food, gas, soveigneirs and extras.

 

[GrumpyOne]

If you know you want to save the money for vacation, take a look at one of the Internet Banks. With lower expenses, they can usually offer better rates and the funds and insured just like at a regular bank. It's not unusual to see a few points better on a CD than you would at Wells fargo or B of A.

The best site I know for comparing bank (physical branch & Internet) services is http://www.bankrate.com

 

[jdads2]

Six years ago the IRS let my wife know that she owed a ton of money for not filing(yrs 88-94). Only problem was that SHE didn't file, WE did. They threatened to take "property" if we didn't start paying back what she "owed".

It took us 5 yrs to show them thier error. They lost half of the ppwk several times. It was a real nightmare.

Last year we recieved some good news, all taxes were paid in full...they didn't say they made a mistake, they just let us know that we didn't owe them anymore. In May we finally got our refund.

Guess what happens this year? We get a certified letter letting us know that they are keeping our tax refund for taxes that my wife supposedly owes for 92 and 94. Here we go again. Good thing we kept all the paperwork. We don't get mad anymore, just shake our heads and go over to the filing cabinet and start making copies.

It's a good thing that we didn't really need that money for any emergencies.

Dave

First time to WDW Oct-Nov 2001

 

[Sharmaine]

What? My gov't isn't stealing from me? My goodness - my time and peace of mind are worth more! Not to mention the YEEHA value.

I have the auto-deposit GIC savings account. Thats the account against which we PLAN yearly expenditures and try to estimate yearly emergencies. Since we have enough of that kind of money, I am all to happy to leave the "extra" tax paid with the gov't for the year, where it CAN'T be touched no matter what - and where I don't have to spend a single SECOND thinking about it or tracking it or otherwise managing it. It just shows up, and thats fine with me - worth every penny I "spend" to have it "just show up"

 

[robsmom]

I too am an accountant (or was) and thought I would weigh in. First I have to admit that our refunds are bigger than we should let them be, but I am on the conservative side and try to make sure I never owe. Plus, like many, I like that check. That said, intellectually I know that this is not the right thing to do.

I don't know if the rules of this board allow mentioning specific funds, but there are some that will allow you to open a money market at 5-6% interest without the usual minimums of $1000 or more. They usually will let you do it if you agree to have the money directly deposited from your bank account as previously suggested. Open the 1st few statements to make sure it is working and than don't open them after that. Don't even look at the money, pretend it is not there. Many notes talked about disciple and car repairs, tuition. When these things come up ask yourself, if I didn't have this fund I would come up with another source. What would it be? I am assuming in the past that you found a way to pay that tuition??? Then do what you would have done. One thing that I did that really worked was putting every raise into savings. I didn't miss the money because I had the same amount as before.

offsite Feb, 1975,1976
Dis VacVillas, 1992
Marriott, 1994
Vistana Timeshare 1997
Hilton Grand Vac. 3/01
Vistana Timeshare 12/01

 

[manman1]

That's also how my DH & I are going in September. We have put them money into a savings account and we are drawing interest for the next few months before our trip.

manman1

 

[LeahA]

My husband and I have been paying for our vacations for the last 9 years with our tax returns.

We have 2 kids and a new house, there is no way we could save this money ourselves.

We save our change as well, but, it doesn't compare to the amount were getting back in taxes this year.

It may not be fianancially smart, but, it works for us!

 

[Stinky_Pete]

robsmom mentioned what we've found to be very successful for us. We met a financial planner who represented a particular financial services company. They offered plans for people like us, who always had the best intentions of saving but "something else always came up" and we spent the money elsewhere.

We now have a money market fund through them and the monthly contributions are debited directly from our checking account -- it gets paid every month just like a bill. I think we only needed $100 or so to open the account. Now, if we want the money, we've got to call our friend Liz and request that a check be sent. Not very convenient to access the money, so it works well for us.