6 Smart Uses for Your Tax Refund

6 Smart Uses for Your Tax Refund https://learningcentre.statefarm.ca/finances-1/-taxes-1/6-smart-uses-for-your-tax-refund/ bb3 Jan 24, 2014

By Staff Writer

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You finished your tax returns and discovered you'll be receiving a nice refund. You're not alone. The Canada Revenue Agency reports that the average Canadian received a refund of nearly $1,600 in 2011. But before you start dreaming of a tropical vacation or a shopping spree, consider how that money could help you shore up your financial situation. Here are six ideas to consider.

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  1. Pay off credit card debt. Maintaining any balance, but especially the maximum on a high-interest credit card costs you money every month. Pay off or cut down your balance and, depending on your account balance, you could save hundreds of dollars in interest fees this year.
  2. Boost your emergency fund. Experts recommend stashing the equivalent of three to six months worth of income in an emergency fund. If your account is low, has been depleted or doesn't exist yet, use your refund to help cover your expenses in an emergency.
  3. Ramp up retirement savings. According to a 2013 LIMRA study, approximately 24% of Canadian pre-retirees say they're not confident they'll be able to live comfortably in retirement. If you've gotten behind in your savings, this may be the place to put your tax refund. Depending on your situation, age and income level, contributing to a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA) are options worth looking at.
  4. Start or add to an education savings fund. Even if your kids are young, those post-secondary tuition bills will be arriving before you know it. Seek out an educational savings plan such as a Registered Education Savings Plan (RESP) and get a head start on your child's education.
  5. Improve your efficiency. Investing in home improvements can pay off in reduced energy bills. For example, replacing an old refrigerator with a new energy-efficient unit can save you $200 to $1,100 over the lifetime of the appliance. Some energy-efficient upgrades may help you get a discount from your utility company as well.
  6. Bolster your life insurance. If it's been awhile since you reviewed your insurance coverage, this may be a prime opportunity. As life progresses and your situation changes, you may find you're underinsured. Your State Farm agent can help you determine the level of coverage that's right for you.

Consider putting your refund money to work for you. Talk to your State Farm® Representative about your options.

Mutual Funds are not insurance products and are distributed through representatives of State Farm Investor Services (Canada) Co. State Farm Investor Services (Canada) Co. is a separate legal entity from State Farm Mutual Automobile Insurance Company, or any of its insurance affiliates.

Please read the applicable simplified prospectus before investing. Commissions, trailing commissions, management fees, and expenses may be associated with mutual fund investments.

Mutual Funds are not guaranteed, their values change frequently and past performance may not be repeated. Mutual fund securities are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer.

Neither State Farm nor its agents provide tax, legal or investment advice. Please consult a tax, legal or investment advisor for advice regarding your personal circumstances.

State Farm branded policies are underwritten by Certas Home and Auto Insurance Company or Desjardins Financial Security Life Assurance Company.

State Farm Investor Services (Canada) Co. Aurora, Ontario
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