Most people who file a tax return wind up with a refund from the IRS, and whether that sum is large or small, it's important to put it to good use. That generally means not blowing that cash on things like leisure, gadgets, and vacations, and instead using that money to meet key financial goals.

Now you'd think younger Americans would be the first to spend their tax refunds recklessly, but a recent H&R Block survey of Gen Zers aged 18 to 22 tells a different story. Here are the top four things younger folks plan to do with their 2020 refunds -- and why the rest of us should do the same.

Tax refund ahead sign


1. Add to savings

We all need money in the bank for a rainy day, and we also need funds earmarked for retirement. It's therefore encouraging to see that Gen Zers plan to either bank their tax refunds this year so they have cash on hand for emergencies, or use their refunds to secure their financial future.

2. Pay bills

Sometimes, the basic cost of living can be overwhelming, especially if you're working with a limited budget. That could explain why a large number of Gen Zers plan to use their tax refunds to cover essential expenses. Of course, that begs the question -- should any of us be relying on a tax refund to cover monthly bills? Certainly not. But spending a tax refund on heat or electricity is still better than spending it on a new phone.

3. Eliminate debt

Whether you owe money on credit cards or have a nagging auto loan to contend with, the longer you carry that debt, the more it'll cost you in interest. Gen Zers are also planning to use their tax refunds to chip away at their debt -- a move that could be helpful from both a financial and psychological standpoint.

4. Cover educational expenses

Many Gen Zers are still in the process of obtaining college degrees. As such, they plan to use their refunds to cover the cost of tuition, fees, books, and supplies. And that's a good way to avoid further debt.

Use your tax refund wisely

There's a big misconception that the money you get in tax refund form is a gift from the IRS. But in reality, that's not free money you're looking at; it's money you earned last year but never collected in your paychecks. Rather than blow that money frivolously, consider taking a lesson from Gen Zers by using it to boost your savings (both near-term and retirement-related), cover any essential expenses you're at risk of falling behind on, get out of debt, and, if you're still in school, pay for your education.

Will any of these things be as gratifying as using a refund to travel to a beach resort, see a few concerts, or buy the latest TV? Probably not at first. But if you use your refund responsibly, there's a very good chance you'll be thankful you did in the long run.