Save your rebate!
This
spring, 130 million Americans will receive a tax rebate, thanks to the economic
stimulus package just signed by President Bush. Single earners who take home
less than $75,000 will find a $600 check in their mailbox. Married couples with
a combined income of under $150,000 will get $1,200, plus $300 for each of
their children.
For
those who are single, that’s enough for a top-of-the-line iPhone.
Couples could go out and buy a 50” plasma television. If you have kids,
there’ll even be money left over for a Nintendo Wii.
Any
one of those purchases would certainly provide instant gratification. But if
you’re looking for long-term piece of mind, then you’d be far better off saving
your tax rebate. There’s never been a better time to kick-start your financial
future.
Many
Americans already know this. A recent poll commissioned by the Associated Press
found that a third of the country is planning on saving or investing their
rebate.
The
math is compelling. If you put that $1,200 into a high-interest savings account
yielding 3.40 percent annually, you’ll have over $25,000 in 15 years if you add
just $100 each month.
The
reality is that every one of us can benefit from a pool of emergency funds.
Some extra money in the bank is psychological insurance: It means knowing you
can handle a crisis, help a family member, or save for a long-term goal.
Don’t
get me wrong — I like my luxuries. But I can only live in one house, wear one
pair of pants, or ride one motorcycle at a time.
Saving
this tax rebate is especially important for young adults — especially when one
considers the volatility of the entry-level job market.
Studies
suggest that the average freshly-minted college grad can expect to have three
different employers within his first five years out of school. But despite this
fact, most young people don’t keep a fund that can be drawn on between jobs. A
study released last December by the Consumer Federation of America found that
almost two-thirds of Americans aged 18 to 24 think they aren’t saving as much
as they should.
This
tax rebate offers young adults the perfect opportunity to put some money away
without changing their spending habits. And thanks to the miracle of compound
interest, saving early means less to worry about in the future.
Plus,
with the emergence of online banking, saving money is easier than ever before.
With just a few clicks of the mouse, you can start building a nest egg. Once
you’ve deposited this tax rebate in your checking account, for instance, you
can sock it away in an online, high-interest savings account in less than 10
minutes.
And
if you already have an online, high-interest savings account, you can elect a
direct-deposit option on this year’s tax form — and the Internal Revenue
Service will wire the money into your account.
Of
course, saving your tax rebate is just one part of a broader strategy for
long-term financial security. It’s also important to establish concrete savings
goals that can help you and your family stick to
responsible spending habits. For example, many folks have their employer
automatically deposit a small part of each paycheck into a savings account.
Getting
ahead financially is a little like losing weight. There’s only one sure-fire
way to do it, but people are always looking for a shortcut. To drop pounds, you
have to eat less and exercise more. The tried-and-true secret to accumulating
wealth is just as simple, and just as unwelcome to some ears: Spend less and
save more.
People who learn how to save early in life come
out ahead — not simply by accruing money, but by building habits that will
continue to pay dividends for the rest of their lives.
Arkadi Kuhlmann is president and chief executive officer of ING
DIRECT USA.