Best Ways to Spend Your Income Tax Refund

The average refund in Canada is $1,833.¹

Spending your tax refund on a new gadget or accessory can be tempting, however you may want to make this additional money work for you and invest in your future.

1 Pay off debt – Whether it is a mortgage, credit card or student loan, debt adds up and can cause a lot of stress and strain on our finances. Therefore, it’s a good idea to try to pay them off as soon as possible.   

2 Use it for tax-free investments – Whether you are saving for retirement or for a down-payment on a house, contributing to tax-free accounts such as TFSA or RRSP is advantageous. And with RRSP contributions you benefit once again come tax time.

3 Invest in your children’s education – Open and contribute to a Registered Education Savings Plan (RESP). It provides tax-deferred investment growth, in addition to government contribution helping with the education goals that you have for your children.

4 Create an Emergency fund – put away three to six months of living expenses. This will help cover unexpected repairs on your home, car or if you can’t work for a certain period of time, without breaking the budget.

5 Protect the ones you love with life insurance – Life insurance can provide peace of mind that family will be able to maintain the same lifestyle even if you are not around. If you have been putting off purchasing life insurance, now might be the right time to invest in your family’s financial well-being.

What will you do with your income tax refund?

SOURCES:

• ¹ The information contained is as of June 9, 2020 and may be subject to change. These articles are intended as general information only.
  https://www.canada.ca/en/revenue-agency/corporate/about-canada-revenue-agency-cra/individual-income-tax-return-statistics.html