Splitting Tax Refunds and Building Savings: An Empirical Test

62 Pages Posted: 4 Oct 2005

See all articles by Sondra Beverly

Sondra Beverly

University of Kansas

Peter Tufano

Harvard Business School; University of Oxford Said Business School

Daniel Schneider

Princeton University


Families are more likely to save if they can commit to savings before funds are in-hand (and subject to spending temptations). For low- and moderate-income U.S. families, an important savings opportunity arises annually, during income tax season. We study a group of low-income individuals in Tulsa, Oklahoma, who, at the time of tax filing, were encouraged to save parts of their federal refunds. Those who agreed directed a portion of their refund to a savings account, and arranged to have the rest sent to them in the form of a check. Eligible individuals could also open low-cost savings accounts. We document the demand for these services, the characteristics of those who sought to participate, the savings goals of those who participated, the immediate savings generated by the program, and the disposition of savings a few months after receipt. This pilot study suggests that there may be demand among low-income families for a refund-splitting program that supports emergency needs as well as asset building, especially if a basic savings product is available to all at the time of tax filing.

Keywords: Saving, Earned Income Tax Credit, precommitment

JEL Classification: I3, D1

Suggested Citation

Beverly, Sondra and Tufano, Peter and Schneider, Daniel J., Splitting Tax Refunds and Building Savings: An Empirical Test. Tax Policy and the Economy, Forthcoming, HBS Finance Working Paper No. 06-018, Available at SSRN: https://ssrn.com/abstract=814007

Sondra Beverly

University of Kansas ( email )

Lawrence, KS 66045
United States

Peter Tufano (Contact Author)

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

University of Oxford Said Business School

Park End Street
Oxford, OX1 1HP
Great Britain

Daniel J. Schneider

Princeton University

284 Wallace Hall
Office of Population Research
Princeton, NJ 08544
United States

HOME PAGE: http://www.princeton.edu/~djschnei

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