5 Smart Ways to Spend Your Tax Refund

Jamie Powell |

Did you know the average tax refund for 2021 was $2741? Here are 5 money-smart ways to spend your tax refund and accelerate your financial plan!

1. Start or shore up an emergency fund. This is a great idea to put some money aside for a rainy day. A lot of specialists recommend three months’ worth of income. This could be in a high interest savings account, it could be in a TFSA, but put some money away for a rainy day. 

2. Pay off some high-interest debt. When we take a look at a lot of credit cards these days, they're charging between 10 and 20% interest. What a great opportunity to get out of debt and save yourself some money. 

3. Saving for retirement. I love saving money and I feel people need to save more. What a great opportunity to put money into an RSP. The nice thing with an RSP is you generate a refund based on your marginal tax rate, let's call it between 25% and 48%. You put $1 in, you get a refund, we keep this money coming back. If you make less than $49,000 You may want to consider a Tax Free Savings Account. 

4. Charitable Donation. Let's put the money towards a charity, which also generates a charitable donation credit. Did you know that on the first $200 of charitable donations you get to claim a federal credit of 15% however, if you make more than $200 you get to claim it at a 29% federal tax credit. What a great opportunity to give money to a worthy cause, and also get some money back on your taxes. 

5. Education Savings Plan. the government has a program that if you put $1 into an RESP program for a child or grandchild, you get a 20% grant on the first $2500 of contribution for that year. We all know how important education is and how expensive it's getting so what a great opportunity we can put some money aside for their furthering education. 

There are so many great ideas as to where to redirect your tax refund and all of these really depend on your personal situation. If you want a second opinion, or if you want to explore some of these ideas and how they work for you, please reach out to me and I hope you have a great week.