The Top 3 Money Moves Americans Plan to Make With Their Tax Refunds

Tax filers are making big -- and responsible -- plans for their refunds.

Not everyone who files a tax return winds up with a refund -- but most filers do. And this year, Americans are making big plans for that money. According to a recent survey by research organization NORC at the University of Chicago, here are the top three money moves filers who are anticipating a refund expect to make.

1. Put the money into savings

A good 46% of those expecting a refund from the IRS say they'll use that cash to boost their savings. And if your emergency fund could use some padding, you'd be wise to do the same.

A good emergency fund is one with enough money to cover three to six months of bills. And given the events of the past year, it certainly wouldn't hurt to go a bit beyond six months' worth of expenses for extra peace of mind. What's more, if you've had to dip into your savings during the pandemic, your tax refund offers a solid opportunity to put that money back.

2. Cover everyday expenses

Meanwhile, 35% of people expecting a refund say they'll use that money to pay everyday bills. And that goes to show how many people are financially squeezed during the pandemic and need a windfall just to cover basics.

If you get a huge refund this year, you may want to look at adjusting your tax withholding so you have less money withheld from your paychecks week after week. That way, you may get a little more breathing room to cover your essential bills. You can chat with a tax professional or reach out to your payroll department at work to ask about updating your tax withholding.

3. Pay down debt

For 32% of those anticipating a refund, that money will be used to pay off debt. If you're carrying unhealthy debt -- say, a credit card balance or even a personal loan with a high interest rate -- then you'd be wise to do the same.

However, if you're short on emergency savings, your first goal should be to put any money you don't need for bills into the bank. Having a solid emergency fund could prevent you from racking up more debt the next time your income dips or an unplanned bill pops up.

How should you spend your tax refund?

If you're getting money back from the IRS, it's a good idea to set priorities. That means first using that money to cover your basic needs, then using it to complete or replenish your emergency fund. Next, you could use it to pay down unhealthy debt. Only once you've done all that should you think about using your refund to splurge.

Remember, too, that you can use your tax refund on more than one of the above items. In fact, if you look at the percentages referenced, it's clear that tax filers are planning to overlap on some of the above moves. If, say, you get a $2,000 refund but only need $300 of it to cover near-term bills, you might consider putting the remaining $1,700 into savings, or splitting that money between your emergency fund and a nagging credit card balance.

Another thing you should know is that 13% of those getting a refund plan to spend it on something fun. There's nothing wrong with doing the same if your emergency fund is solid and you're debt free other than a car loan or mortgage. But remember, it's not every day that a pile of cash comes your way, so do your best to use that money as responsibly as you can.