No one likes paying taxes or filing a tax return but getting a tax refund can soften the blow. When it comes to your tax refund, you can do many different things with the money. You could spend it on something fun like a new TV or a vacation. But if you’re looking for ways to grow your money, there are better options.
Here are five ways to use your tax refund to grow your wealth:
5 Ways to Use Your Tax Refund
1. Invest in a Mutual Fund or ETF
Mutual funds and exchange-traded funds (ETFs) can be terrific ways to invest your refund conveniently. Both financial tools allow individuals and small investors to access professionally managed groups of stocks and bonds. They may be for you if you want to invest but don’t know much about investing. Each offers a wide choice of domestic and global investment options. Because both funds include bundles of bonds and stocks, they can be considered a lower risk than if you were to invest your refund check into one individual asset.
2. Open a High-Yield Savings Account
When you transfer your refund check into a high-yield saving account, you will earn interest on your account. The interest rates on these accounts are usually higher than those on a regular savings account. In addition, many high-yield savings accounts offer features like online account access and a convenient way to transfer funds in and out of your savings account, which make it easy to transfer funds and keep track of your balance. If you don’t already have such an account, open one when filing your tax return.
The Porte Savings Account is a great option to grow your money. When you open your Porte account, you will automatically qualify to set up a Savings Account with a 0.20% Annual Percentage Yield (APY)!1 You can also qualify for Bonus Savings of up to 3.00% APY in a calendar quarter when you receive qualifying Direct Deposits totaling $3,000 in the calendar quarter and make at least 15 qualifying purchase transactions in that calendar quarter.1
If you don’t already have a Porte account, you can apply 2 today! No credit check is required. It’s never too late to start saving!
Banking services provided by Pathward, N.A., Member FDIC.
3. Pay Off High-Interest Debt
There’s little point in accumulating savings if you have high-interest debts eating away at potential profits. If you have any outstanding debts, use your tax refund to reduce or clear them, starting with those with the highest interest rates. For example, you can reduce your balance and monthly payments with your refund if you have outstanding credit card debts. You could consider paying off overdrafts to bring your bank balance out of the red, make extra car payments, pay a lump sum off a mortgage balance, or something similar. Paying off debt can not only make the figures look healthier, but it can also help to reduce financial stress.
4. Start or Contribute To a Retirement Account
It’s never too early to start planning for your retirement. Although you may look forward to the day when you’re no longer filing income tax returns, you’ll undoubtedly notice a drop in your earnings when you retire from work. You may want to consider investing your tax refund into a retirement account. There are several types of retirement accounts, each with its own benefits and drawbacks. However, you can take advantage of compound interest and tax breaks with all retirement accounts by investing your refund into a retirement account.
In addition, many employer-sponsored retirement plans offer matching contributions, which can further boost your savings.
If you already have retirement savings, why not enhance them?
5. Buy Stocks or Bonds
Although they may be riskier than mutual funds and ETFs, stocks and bonds offer the most significant potential for revenue, returns, and wealth growth in the long term. Savvy taxpayers should be prepared to invest their tax refund for several years, ideally more than a decade, for the greatest chances of financial growth.
In short, using your tax refund wisely can help you increase your wealth. From investing in mutual funds, ETFs, stocks, and shares to saving and paying off debts, there is sure to be an option that suits your financial goals. Plus, you could be eligible to e-file your taxes for free, giving you even more potential cash to save, spend or invest.
This blog is not intended to provide any tax, legal, financial planning, insurance, accounting, investment, or any other kind of professional advice or services. To make sure that any information or suggestions in this blog fit your particular circumstances, you should consult with an appropriate tax or legal professional before taking action based on any suggestions or information that we provide.