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Save that tax rebate

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By The Staff

This spring, 130 million Americans will receive a tax rebate thanks to the economic stimulus package just signed by President Bush. Single earners who take home less than $75,000 will find a $600 check in their mailbox. Married couples with a combined income of under $150,000 will get $1,200, plus $300 for each of their children.

For those who are single, that's enough for a top-of-the-line iPhone. Couples could go out and buy a 50-inch plasma television. If you have kids, there'll even be money left over for a Nintendo Wii.

Any one of those purchases would certainly provide instant gratification. But if you're looking for long-term piece of mind, then you'd be far better off saving your tax rebate. There's never been a better time to kick-start your financial future.

Many Americans already know this. A recent poll commissioned by the Associated Press found that a third of the country is planning on saving or investing their rebate.

The math is compelling. If you put that $1,200 into a high-interest savings account yielding 3.4 percent annually, you'll have more than $25,000 in 15 years if you add just $100 each month.

The reality is that every one of us can benefit from a pool of emergency funds. Some extra money in the bank is psychological insurance: It means knowing you can handle a crisis, help a family member, or save for a long-term goal.

Don't get me wrong - I like my luxuries. But I can only live in one house, wear one pair of pants, or ride one motorcycle at a time.

Saving this tax rebate is especially important for young adults - especially when one considers the volatility of the entry-level job market.

Studies suggest that the average freshly-minted college grad can expect to have three different employers within his first five years out of school. But despite this fact, most young people don't keep a fund that can be drawn on between jobs. A study released last December by the Consumer Federation of America found that almost two-thirds of Americans aged 18 to 24 think they aren't saving as much as they should.

This tax rebate offers young adults the perfect opportunity to put some money away without changing their spending habits. And thanks to the miracle of compound interest, saving early means less to worry about in the future.

Plus, with the emergence of online banking, saving money is easier than ever before. With just a few clicks of the mouse, you can start building a nest egg. Once you've deposited this tax rebate in your checking account, for instance, you can sock it away in an online, high-interest savings account in less than 10 minutes.

And if you already have an online, high-interest savings account, you can elect a direct-deposit option on this year's tax form - and the Internal Revenue Service will wire the money into your account.

Of course, saving your tax rebate is just one part of a broader strategy for long-term financial security. It's also important to establish concrete savings goals that can help you and your family stick to responsible spending habits. For example, many folks have their employer automatically deposit a small part of each paycheck into a savings account.

Getting ahead financially is a little like losing weight. There's only one sure-fire way to do it, but people are always looking for a short cut. To drop pounds, you have to eat less and exercise more. The tried-and-true secret to accumulating wealth is just as simple, and just as unwelcome to some ears: Spend less and save more.

People who learn how to save early in life come out ahead - not simply by accruing money, but by building habits that will continue to pay dividends for the rest of their lives.

- Arkadi Kuhlmann is president and CEO of ING Direct USA.