How to Spend a Windfall

Savings top the list of what Americans would do with $100.

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Say you unexpectedly received $100 this weekend. How would you spend it? Would you get a massage, buy a new outfit, or go out for a fancy dinner? Most Americans say they would save at least part of it, and one in three would save all of it, according to the Chase Freedom-U.S. News Consumer Monitor released this week. That might be worrisome news to retailers, but it’s the latest sign that Americans are getting on top of their finances.

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The finding appears to confirm that the tough economic times have spurred many Americans to become smarter about their money. The latest numbers from the Federal Reserve show that credit card debt is down -- both because more people are paying off their debt and because card issuers are reducing available credit lines. Participants in the Chase Freedom-U.S. News survey also said they were cutting back in other areas, too: Most respondents said they already do their own home repairs and yard work to save money, and about half said they have already cut back on summer utilities (such as air-conditioning) or plan to make that change soon.

Perhaps because of those cost-saving measures, more survey respondents said they expected their savings to increase by the end of the summer than those who said they expected their savings to go down. About one in three said they had more than $3,000 in savings, excluding retirement funds.

When asked why they are saving, most people didn’t have any specific reason in mind. Some 9 percent named a future home purchase and 8 percent listed retirement. Car purchases, travel, school, and emergencies were among other popular answers. These hypothetical answers seem to reflect real-life choices.

In real life, people don’t usually receive a cash windfall, but tax refunds come closest to feeling like one, so illustrate how people actually spend “found” money. Recent surveys have found that a significant portion of consumers tend to save their refunds. When tax rebate checks were mailed out in 2008, a TNS Retail Forward survey found that one-third of people used it to pay bills, 30 percent saved it, and one in four put the money towards every day expenses such as good and gas. Just 1 in 5 shoppers used it to buy something special, like a new television.

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Personal finance experts endorse that approach and usually say they would direct extra cash towards necessary expenses. Faye Griffiths-Smith, community leader for the American Association of Family and Consumer Sciences, said she would consider buying an appliance in her home that needed replacing, such as a dishwasher, washer, or dryer. Gail Cunningham of the National Foundation for Credit Counseling said she would save extra money for retirement. And Lynne Strang of the American Financial Services Association says she would save it for her children’s future college tuition.

Back to your own plans for $100. Here are some more ideas, based on survey respondents’ answers: Treat yourself to something fun (8 percent), donate or give the money away (1 percent), pay bills (1 percent), or give the money to family or friends (1 percent). Among those who said they would spend the money, they named food (27 percent), bills (22 percent), entertainment (7 percent) and something for the house (7 percent).

Share what you would do with the money below.