Special thanks to Chris Haymon for contributing this post as our featured guest author of the month! Chris Haymon runs Adulting Digest, a website that educates exclusively on the topic of financial literacy, which is one of LifePlan Labs’ core pillars in our curriculum. In alignment to our organization, he is also dedicated to increasing awareness on practical financial literacy topics to help others avoid learning them “the hard way”.
According to the Motley Fool, the average tax refund in 2019 so far is $2,833. To most people, this is a very welcome windfall. But how are you supposed to spend it?
While it may be tempting to treat yourself to a shopping spree or a fun vacation, there are many more effective uses for this money. Making a smarter financial decision at this point may feel “boring,” but it could actually help you save for those treats in the long run.
Tax Refund + A High-Yield Savings Account = 🙌
If you don’t have anything specific to save for, you could always make the most of your tax return by placing it in a savings account and leaving it to grow. The longer you leave it alone, the more money you can make. Have a look at NerdWallet’s best high-yield savings accounts to select the one that is most suited to your needs.
Open A College Fund
If you have children (or plan to have them someday), the astronomical costs of higher education can be extremely scary. Using your tax refunds toward a college fund can alleviate some of the pressure while still giving your kids the chance to go to college if they choose to.
Start An Emergency Home Repair Fund
Emergency home repairs tend to happen at the most inconvenient times. Get ahead of the curve by having a fund ready to deal with any leaks, cracks, or other repairs that pop up.
Even better, use the money to give your home some much-needed maintenance. For example, if your roof is showing signs of damage, like broken shingles or moss, it’s better to act now. The national average cost of having your roof repaired is $823. The Better Business Bureau is a great resource for finding reliable contractors. Their website allows you to filter your search by BBB accreditation, and also contains useful advice like how to extend the life of your roof by regularly clearing debris and checking for damage.
The world of investments is dominated by technical jargon and confusing acronyms, which can intimidate the average person. But it’s now easier than ever to start investing, especially with a host of investment apps for all levels of experience. There are even apps that will do the investment for you, so it’s never been easier to start making your money work.
Add It To Your Retirement Fund
Retirement may seem like something far in the distance for most people, but the truth is that any money you put aside now will likely be a huge help in the future. Additionally, any tax return money you put into an IRA (individual retirement account) may be eligible for a tax deduction for your next tax return, so you’re saving even more money.
Develop Your Skills With Your Tax Refund
Is there anything you’ve always wanted to learn, or a qualification that’s missing from your resume? Your tax refund can help you fund some development and training, which in turn can both boost your career and bring you a sense of accomplishment. If you’re not quite sure what you’d like to learn, look into profitable skills that are likely to become more important in future years, like coding and speaking Mandarin.
Set Your Tax Refund Aside For Your Pet
If you have a pet, there is a very high chance that you will be hit with at least one eye-watering vet bill during their lifetime. The average emergency vet bill ranges between $800 and $1,500, with some treatments costing upwards of $5,000.
It’s a good idea to have some money set aside to cover this eventuality. Using your tax refund for this could mean saving yourself the stress of having to choose between debt and losing your beloved pet.
Think of your tax return as a financial boost, separate from your usual money. When used smartly, it can allow you to grow your money or to prevent big expenses that would eat into your savings (or worse, plunge you into debt). This, in turn, frees up more money for you to spend on the things that matter to you, whether it’s for your family, hobbies, or travel.
If you’re looking for more information on concepts like these, consider trying one of our free lesson plans dedicated to helping students prepare for adulthood.