Ahhhh…. tax time! If you’re lucky to have some money coming back to you, there are many ways it can be spent. Here are 3 smarter ways to spend your tax refund including the benefits to training younger family members to do the same.
Smart ways to spend your tax refund
So it’s almost time to file your taxes… again.
Now you await your refund.
According to a CIBC survey, 58 per cent of respondents expected a tax refund last year.
No doubt, luxury goods – that stylish pair of Fluevog shoes or the Apple Watch – beckon. But instead of spending your refund on fleeting pleasures, why not resist temptation and use the money to invest in your future self?
Three smarter ways to spend that refund:
- Home upgrades. Especially if you’re planning to sell your house, investing your tax refund on smart renovations and upgrades could help you make your home more appealing to prospective buyers. For example, green upgrades – improved insulation, new windows, and energy efficient appliances, for example – can help you cut your energy bills now and give your home a selling edge later.
- Emergency fund. No explanation needed. Start or add to your emergency fund.
- Retirement accounts. Your future self will thank you if you plow your refund into your RRSP or TFSA.
Now also may be a good time to impart some financial wisdom to your kids and grandkids about saving and spending.
In its fifth annual tax study, BMO Nesbitt Burns found out how Millennials planned to spend their tax refunds. Some – 16 percent – plan to use the money for travel or luxury items.
But others have wise plans, such as paying off outstanding bills or reducing debt (37 percent); saving it (33 percent); and paying down their mortgage (14 percent).
That said, the study also look at Millennials’ knowledge about strategies and investments that can reduce their tax hits.
- Only 48% seek out tax efficient investment options and a bulk of the group doesn’t understand strategies for reducing that tax liability.
- Fifty-nine percent don’t fully understand how capital gains are taxed
- 60 per cent aren’t sure how dividend income is treated from a tax perspective
Helping members of the younger generation understand the implications of their financial choices and getting them off to a good financial start will help them have a more secure future.
But it also benefits you.
Maybe they’ll be less likely to come knocking on your door for loans.