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Arijit Roy is among the U.S. Bank experts helping bankers better educate and inform clients on how to maximize cash windfalls

For many Americans, the biggest bump in their bank account is from a tax refund or bonus payout in the first few months of the year. Arijit Roy, head of consumer segment and solutions at U.S. Bank, said he oftentimes finds himself fielding the question: If you are fortunate enough to have a flush of cash this spring, should you save it or spend it?

“With so much going on in the economy right now, it’s hard to understand how competing factors impact your spending. Do you take that trip before prices go up? Should you wait to get that car serviced?” Roy said.

Even with each family’s situation being different, Roy said it is an excellent time to save.

“What we are seeing right now is that the interest rate environment continues to make saving products an attractive option,” he said. “You can make even just $1,000 grow over time with products like certificates of deposits offering returns we haven’t seen in decades.”

Roy is among the experts at U.S. Bank that have been watching consumer spending and savings trends closely to help bankers better educate and inform clients around options and planning for small or large cash windfalls they might be receiving this spring.

He recently sat down to discuss strategies to determine how to maximize the impact of a tax refund.

Is the best move always to pay down debt?

Not all debt is bad. For instance, if you have a car payment at a locked moderate or low interest rate, it might not make sense to make an extra payment or pay it off entirely. Other variable rate debt can creep up on you and rapidly compound, such as revolving balances on credit cards with high interest rates. If you have growing variable rate debt, it may make sense for you to pay off as much as you can using your tax refund.  

How much of an emergency fund do I need?

A good rule of thumb is to keep three to six months of living expenses in your emergency fund. Start with your daily checking account and build up a buffer. Once you’ve reached your comfort level of at least three months of emergency or buffer savings, consider other higher-yield, lower-liquidity products. Make a plan to replenish any funds you’ve used, even if it’s slowly over time. If you don’t have an emergency fund, consider using your tax refund to start one. It’s never too late to start saving.

In this environment, how can I make my money grow?

If you’ve looked at your debt and feel good about what you’ve set aside for emergencies, consider putting any remaining cash into an interest-bearing savings product, such as a certificate of deposit or money market account. These products are offering some of the highest rates of return (annual percentage yields) we’ve seen in decades and can help lump sums of all sizes grow. This can also be an effective strategy to save toward upcoming life moments like buying a car, a special vacation or paying for a wedding.

For more information on how U.S. Bank is helping customers and communities during tax time, visit the U.S. Bank Tax Resource Center. For more information and tips regarding managing your money, visit Financial IQ.