Income tax season probably isn't your favourite time of year, but realizing you're getting money back helps justify the effort. If you're expecting a refund this year you've might already know what you'll do with it (hopefully it's one of our tips for using your refund wisely).
But if you haven't quite decided yet, we're here to make a strong case for investing it (cliché but hear us out).
Here are three reasons you should invest your tax refund.
1. To reduce temptation
Let's be honest. It's easy to spend money when it's sitting available in your chequing account. Having a plan to redirect that cash into an investment means you'll be less likely to spend it (consciously or unconsciously). Then when your refund arrives, you're ready to transfer it immediately to your chosen destination.
Future you is already grateful.
2. To protect yourself from the unexpected
How much do you have in your emergency fund right now? Is it enough to cover a surprise expense like a major home or car repair? The lump sum of cash you get as your tax return is a great opportunity to top up your emergency savings so you're best equipped to handle life's curveballs.
Invest it in a tax-free savings account (TFSA) and you'll have access your money whenever you need it, while benefiting from earning interest.
3. To maximize interest
Last but not least, the best reason to invest your tax refund is to take advantage of compound interest (woo woo). The more money you have invested, the more growth you'll enjoy from the interest building on itself.
For example, compound interest alone could increase the value of a $1,000 investment by 50% in 10 years (based on a rate of 5% compounded annually). This is great for long term goals like your retirement savings.
Now that you're convinced investing your tax refund is the right move it's time to decide which investment product is right for you.