Tax Refund Primarily Used to Pay off Debt: Scotiabank Study

  • Those earning less than $40,000 most likely to use tax refund to shop
  • Younger Canadians most likely to save refund

TORONTO, May 27, 2011 /CNW/ - If they haven't already, the majority of Canadians will soon be receiving a tax refund and according to Scotiabank's Annual Income Tax Refund Poll conducted by Harris/Decima, almost one quarter of Canadians (23 per cent) plan to put their refund toward debt reduction. An additional one-in-five Canadians plan to save their refund by putting it in the bank (14 per cent), investing it (five per cent) or contributing it to their RRSP (one per cent). Just over one tenth (11 per cent) of Canadians don't yet know what they will do with their tax refund.

"The commitment Canadians are showing to reducing their debt and saving is promising," said Mike Henry, Senior Vice-President & Head, Retail Payments, Deposits, and Lending, Scotiabank. "Paying down debt, saving, or investing with a tax refund demonstrates that Canadians are thinking ahead for their financial well-being."

Though the 2011 poll results are fairly consistent with the 2010 results, this year only six per cent of Canadians plan to use their tax refund to go shopping, marking a slight decrease from last year's nine per cent. Canadians are also less likely to use their tax refund to go on vacation this year (two per cent vs. five per cent in 2010).

"It's encouraging to see that Canadians are thinking before they spend when it comes to their tax refund," commented Mr. Henry. "While it can be tempting to spend the lump sum of a tax refund, it can also be a great way for Canadians to boost their savings and set aside money for a rainy day. For Canadians who want to set aside their refund, a tax-free savings account can be an excellent place for them to put their money as interest is earned tax-free and there aren't any penalties for withdrawals."

Poll Highlights

By Province

  • Residents of Atlantic Canada are more likely than other Canadians to put their tax refund toward home renovations (14 per cent vs. four per cent).

By Household Income

  • Although still top priorities, only 21 per cent of those Canadians earning less than $40,000 are likely to spend their refund on reducing debt and only 15 per cent on saving for the future. So where is their refund going? Canadians earning less than $40,000 a year are more likely than those earning $40,000 or more to use their refund for shopping (10 per cent vs. four per cent).

By Age

  • Younger Canadians (18-34) are more likely than their older counterparts to deposit or invest their refund (27 per cent vs. 13 per cent), whereas older Canadians (55+) are less likely to expect to get a refund (36 per cent vs. 18 per cent).

By Gender

  • Men are more focused than women on saving their refund (23 per cent vs. 17 per cent), while women are just as likely as men in their likelihood of using their refund to pay off debt (24 per cent vs. 22 per cent).

"Young Canadians seem to have their financial priorities in order, a trend that we hope continues in years to come," added Mr. Henry. "It's important to remember that a tax refund isn't free money - it's your money! So, take a minute to think about your financial priorities before making any decisions."

For more information on the Tax-Free Savings Account, visit www.scotiabank.com.

The data was gathered between April 7th through April 10th, 2011 through Harris/Decima's weekly teleVox, the company's national omnibus survey. Results are based on a sample of 1,018 Canadians, and the corresponding margin of error is ±3.1%, 19 times out of 20.

Scotiabank is one of North America's premier financial institutions and Canada's most international bank. With more than 70,000 employees, Scotiabank Group and its affiliates serve some 18.6 million customers in more than 50 countries around the world. Scotiabank offers a broad range of products and services including personal, commercial, corporate and investment banking. With assets above $541 billion (as at January 31, 2011), Scotiabank trades on the Toronto (BNS) and New York Exchanges (BNS). For more information please visit www.scotiabank.com.

SOURCE Scotiabank

For further information:

Robyn Harper, Scotiabank Media Communications, (416) 933-1093 or robyn_harper@scotiacapital.com


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