Sometimes spending money wisely can be a challenge, especially tax refunds, which can seem like free money. If you’re lucky enough to get a tax refund this year, take a moment to think about how you could put that money to work for you.
Here are some smart ways to use your refund:
- Add to your emergency fund. Set aside enough cash to cover six months of expenses just in case the unexpected happens. Our digital goal setting tool can help.
- Pay down credit cards and other high-interest debt. You’ll save money on interest charges and increase your monthly cash flow.
- Jump-start next year’s RRSP. Contributing early allows you to take advantage of all those extra months of tax-free growth. At retirement time, this can mean thousands more in your pocket.
- Invest in a tax-free savings account. Growth or earnings in a TFSA are 100% tax-free, and you’re allowed to contribute up to $6,000 for 2020. You can add to your TFSA, or open a new one, in Servus online banking.
- Pay down your mortgage. Making lump sum payments on your outstanding principal will save you significant dollars in interest charges over the long term. You’ll also own your home mortgage-free that much sooner.
- Save for a child’s education. Invest in a registered education savings plan on behalf of a child or grandchild and you’ll qualify for a government-sponsored Canada Education Savings Grant of between 20 and 24% of your contribution (to a maximum of $600).
- Take care of outstanding RRSP loans. Some loans have three- or four-month grace periods, during which time you’re not required to make any payments toward the interest or principal. Remember that the interest owed continues to add up until the loan is completely paid off.
How you spend your money today will have a significant impact on your future. For advice on how to get your tax refund working for you, call us at 1.877.378.8728 and talk to a Servus financial advisor.
Originally posted on March 29, 2018.