How to Proactively use your Tax Refund
Here are some ideas for how to use your refund wisely:
1. Pay down debt
Consider earmarking 20% or more of your windfall toward paying down the high-interest debt you may be carrying. You’ll save a ton on interest and be finished with the debt sooner than you’d planned.
2. Start saving
Take $1,000 out of your refund and start a savings account. Look for savings accounts that will help grow your money, like our High Yield Savings or Premier Savings account. You can set up an automatic transfer from your checking account each month to help it grow, even if you can only afford as little as $10.
3. Invest it
Instead of just working for money, let money work for you. Always do your research first before making any investment decisions and talk to licensed investment professionals.
4. Pay for repairs
Use the money you get to repair that leaky roof or replace your tires.
5. Make an extra home or auto payment (or two)
Doubling up on your payments can help save on future payments and might relieve some stress later on.
6. Open a savings account for your child.
A four-year, out-of-state college education can cost over $100,000. A Name It Save It account or Education Savings Account is an excellent solution for a college fund.
7. Reward yourself
It’s ok to use a part of your tax refund to save for that future vacation or that fun big-ticket item. Money is to be enjoyed as well as earned, saved, and invested. Go ahead. Book that cruise!
Although all these ideas are excellent uses for a lump-sum amount of cash, remember that instead of planning for a refund, it could be more beneficial to come out even. A tax refund is an interest-free loan to the government and money that is not in your pocket every month. If you have been getting a refund each year, consider changing your withholding exemptions, so less tax is withheld from each paycheck. While a tax refund may feel like a gift from Uncle Sam, it’s not—it’s money that you have overpaid on your income taxes. Some people use this as a form of saving.