Getting a tax refund? Buy a savings bond

If you are getting a federal tax refund from the Internal Revenue Service, you can choose to use that money to purchase U.S. savings bonds. A refund may seem like extra money to spend as you wish. But, it's also a good opportunity to put some dollars away for future major purchases, unexpected expenses, or a college education. Everyone can use an "emergency" cushion for auto repairs, medical bills, or unexpected events.

Starting in January 2010, taxpayers can purchase Series I U.S. Savings Bonds with a portion or all of their tax refund. The bonds can be purchased at the time tax returns are filed, eliminating the temptation to spend the refund check when it arrives.

It's simple and easy to buy savings bonds with a tax refund. Just tell your tax preparer you want to buy savings bonds with all or part of your refund. If you prepare your own return, file Form 8888, Direct Deposit of Refund to More Than One Account.

Purchasing bonds with a tax refund must be done in increments of $50. In any single calendar year, up to $5,000 of I bonds can be purchased under this program. If you don't buy I bonds with 100 percent of your refund, you will need to have another account in which to deposit the remaining amount of your refund. For example, if your refund is $280, you can direct $250 to I bonds and the $30 balance to your savings account.

Don't get too excited about that refund. Getting money back means you're essentially lending money, interest free, to the government for the year. Better to have those dollars in your account. So, if you've been getting big refunds or have had changes in your life -- marriage, divorce, baby, increase or decrease in income -- adjust the withholding allowances on your W-4 form. Www.irs.gov has a withholding calculator to determine the correct figure. To learn more about purchasing savings bonds with your tax refund, go to www.irs.gov.

Here are more tips for saving money.

* Thinking of pocket change as an investment opportunity may seem like a bit of a stretch. Yet the United States Treasury reports that Americans hold about $15 billion in loose change. It is estimated that the average household accumulates $50 of change every month. That amount invested over 20 years (at 5 percent interest) would yield over $20,000.

* Saving change at the end of each day or week can add to personal savings or be used to fund extras. Use your change for an evening out each month or to pay extra on a bill. Saving that change can also help you reach longer term goals like a weekend getaway or upgrade for the family's computer, television or other recreational equipment, such as a new bicycle.

* Pay down your credit card balance as quickly as possible. If you had a $2,000 credit balance at 18 percent interest and your minimum payment is four percent of the balance or $80, it will take about 9 years and six months to pay it off and you'll pay $1,116 in interest. By paying an extra $15 a month on this debt, you would save $694 in interest and pay it off in two years and two months.

* You could save $195 a year by buying soda from the grocery store rather than a vending machine every day. This estimate is based on one soda being bought every day of the work week at a grocery store cost of $.50 and a machine cost of $1.25.

Editor's Note: Ann Ludlum is a K-State Research and Extension family and consumer sciences and 4-H extension agent assigned to Bourbon County. She may be reached at (620) 223-3720 or aludlum@ksu.edu.