In June’s Big Data brief, EARN’s data revealed that after receiving a tax refund, both checking and savings account balances of EARN’s Savers increased. While checking account balances quickly returned to pre-refund levels, savings balances gradually reduced over the next three months but remained 50% higher than pre-refund levels.
To understand how Savers used their refunds, we dug into transactional data of 25,000 Savers to compare spending and saving behaviors of Savers who received a refund in February with all other Savers. The data showed that spending and saving immediately spiked for Savers receiving a refund in February; debit transactions from February refund recipients’ bank accounts were up 95% from the prior three-month average, versus only a 2% increase for all other Savers.
Three broad themes emerged: Tax refunds led to much higher than normal contributions to savings accounts and large payments to catch up on outstanding bills like credit cards, utilities, and medical expenses. Some money was even allocated towards recreation and fun.