A Summertime Boost for Financial Emergencies through the Refund to Rainy Day Savings Act
Late summer can bring financial emergencies for many households including car repairs, education expenses, and more. On average, the amount that working households received in tax refunds through the EITC (Earned Income Tax Credit) in 2019 was $2,488. Unfortunately, for most households, this refund is long gone by the end of summer to debt management, bills and other necessities.
The Refund to Rainy Day Savings Act (S. 1018/H.R. 2112) aims to use that money to help households weather a financial storm later in the year. This legislation was introduced during April in the Senate – and for the very first time – in the House by Senators Cory Booker (D-NJ), Tom Cotton (R-AR), Doug Jones (D-AL) and Todd Young (R-IN). Also supporting this new bill are Representatives Bonnie Watson Coleman (D-NJ-12) and French Hill (R-AR-2). This legislation is important because it has the potential to give working households a second financial boost months after tax time.
This bipartisan bill helps tax filers set aside a portion of their refund as emergency savings for later in the year. Drawing from our Rainy Day EITC proposal, this legislation allows working households to defer 20% of their refund by opting into the program. The savings would be transferred into their account six months later with interest. This bill also includes language to expand the flexibility of the innovative Assets for Independence (AFI) grant program which encourages earnings, savings and self-sufficiency by offering matching funds to help low-income workers save their own money and build assets.
This means that if the Refund to Rainy Day Savings Act passes, the households who opt into the program would have had almost $500 directly deposited in their accounts around this time next year—six months after they had completed their tax return. These funds could help working households through financial emergencies that happen from heat, natural disasters and the start of the school year in the final weeks of summer. With 40% of Americans in liquid asset poverty, unable to live at the poverty level for three months without income, this bump can make a huge difference in helping them get through the summer’s financial challenges.
Help us turn this bill into law so that next year, working households can get a boost for the inevitable summertime financial emergencies. Contact your Senators and Representative and ask them to sponsor the Refund to Rainy Day Savings Act (S. 1018/H.R. 2112).