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 consider how you could put that money to work for you instead of spending it on a big screen TV, new wardrobe or beach holiday.
Here are some ideas on how you might spend that refund:
- Add to your emergency fund. Set aside enough cash to cover four to six months of expenses — just in case the unexpected happens.
- 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 $6,500 in 2023.
- Pay down your mortgage. Lump sum payments on your outstanding principal will save significant dollars in interest charges over the long term. It also means you’ll 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 – that’s 20% of the first $2,500 contributed to the RESP.
- Take care of outstanding RRSP loans. Some loans have grace periods during which time you’re not required to make any payments towards the interest or principal. Remember that the interest owed still continues to accumulate until the loan is completely paid off.
Remember, 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, talk to a member of our Wealth and Investment team today!
*Mutual funds are offered through Qtrade Asset Management (a tradename of Credential Asset Management Inc). Mutual funds and other securities are offered through Qtrade Advisor, a division of Credential Qtrade Securities Inc. The information contained in this report was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This report is provided as a general source of information and should not be considered personal investment advice or a solicitation to buy or sell any mutual funds and other securities. Unless otherwise stated, mutual fund securities and cash balances are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer that insures deposits in credit unions.