If you are due for a refund, you have probably already filed your taxes. But the thinking doesn’t stop there.
As the tax deadline approaches, you may be wondering: what should I do with my tax refund? Financial security is top of mind nowadays, but how do you achieve it? Here are five smart ways you can use your refund money to help build financial security:
1. Pay off debts.
Many credit card companies have high-interest rates on new credit cards, leaving you to pay a lot more than what you spent to lower that balance. Don’t let interest fees bury you in debt. Use your tax refund to tackle any existing debts you may have. These debts could be credit cards, student loans, car loans or money you owe a friend or family member. It might not be the most exciting use of your tax refund, but it’s a smart financial move in the long run.
2. Start an emergency fund.
Saving smarter means preparing for the unexpected. Consider opening a savings account that’s designated for emergencies only, like sudden medical expenses or unforeseen complications with your job. Start building to set aside 3 to 6 months of income to support you through a future crisis.
3. Prepare for significant future expenses with a deposit program.
If you see big future purchases like a new car or home improvement on your horizon, consider opening a certificate of deposit with your tax refund. By setting the money aside now in a high-interest CD, you can ensure you have the funds available when your next significant expense arrives.
If you’re one of the lucky few that has minimal debts, emergency funds and savings plans in place, investing your money could be a smart use of your tax refund. There are plenty of new and existing stocks to invest in, but make sure you do plenty of research before putting your money anywhere. You could also consult a financial professional to help you make decisions that align best with your interests and goals.
5. Give your car or home some love.
Home and car ownership are important investments that could lead to costly expenses down the line if you’re not careful. Use your tax refund to put money toward your home in the form of down payments, mortgage payments or any pricey repairs you may have been putting off. Similarly, use your tax refund to pay down your car, get repairs done or put a down payment on a new vehicle.
How do I keep saving smarter?
With these helpful tips in mind, we at AAA hope you’ll be able to put your tax refund to good use. Whether you’re paying down debts, planning for your future or paying for repairs, we’re confident that you’ll find smart ways to spend your tax refund.
Save smarter this year with help from Discover Bank®* – the only bank that offers AAA members preferred member annual percentage yields (APYs). To learn more about savings, the money market, and CD accounts, visit AAA.com/Deposits or call 1 (800) 347-7056.
*Discover Bank, Member FDIC