Members of America's career military are planning to use their tax refunds to fortify family finances, according to new research.
First Command's annual survey on tax refunds reveals that 85 percent of middle-class military families (commissioned officers and senior NCOs in pay grades E-5 and above with household incomes of at least $50,000) who have received or expect to receive a tax refund plan to use it to cut debt, save more or pay monthly bills. This continues a long-term trend in which the majority of military families report plans to commit their refunds to these and other frugal behaviors.
"Career military families are tagging tax refund dollars for frugal strategies that can help them deal with the continuing fiscal uncertainties of sequestration and defense downsizing," says Scott Spiker, CEO of First Command Financial Services, Inc. "Seven out of ten military families report feeling anxiety about cuts to defense spending, and they worry about the impact on their family finances.
"Many of our survey respondents say they are responding to these federal budget cuts by saving more and spending less," he adds. "By using tax refunds to fortify their family finances, our men and women in uniform are making the right moves to feel better about an uncertain future and get their financial lives squared away."
The latest survey findings from the First Command Financial Behaviors Index reveal that middle-class military families will be using their tax refunds to:
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Pay down debt (43 percent)
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Bump up general savings (42 percent)
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Pay monthly bills (33 percent)
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Build up an emergency fund (22 percent)
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Take a vacation (19 percent)
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Pay for consumer purchases (16 percent)
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Open or pay into a college savings account (15 percent)
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Pre-pay major bills (13 percent)
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Dine out (12 percent)
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Make home improvements (12 percent)
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Put toward an investment account (11 percent)
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Apply to future taxes (8 percent)
The commitment to frugality is particularly strong among service members who work with a financial advisor, the report notes. These families are considerably more likely than their do-it-yourself counterparts to commit their tax refunds to:
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college savings (23 percent versus 0 percent);
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investment accounts (18 percent versus 0 percent) and
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future taxes (12 percent versus 0 percent).
In contrast, families without a financial advisor are more likely to plan on using their refunds to pay down debt (66 percent versus 30 percent).
"Military families who work with a financial advisor may be more likely than others to save and invest their refunds and less likely to need to pay down debt because they already have healthy household budgeting behaviors," Spiker says. "The key is the coaching relationship offered by financial advisors. Through these ongoing relationships, military families can improve their behavioral discipline in the pursuit of financial security."
See the infographic on the following page showing the top 10 ways America's military families plan to use their tax refunds in 2016.
