Saving money is sort of like eating healthy. You know you should do more of it, but it’s very hard to resist making spur-of-the-moment choices that make you happier now but worse off later, like eating 4 brownies. A tax refund gives you a great chance to set yourself in a better position for the future. If you’re getting a waterfall from the IRS, here are a dozen great ways to make sure that your money continues to work for you!

Create an emergency fund

Many Americans don’t have access to a savings account in case of an emergency like a sudden financial need. This lack of savings leaves people vulnerable to job loss, medical emergency or major repair and can force you to seek out short-term loans at high interest rates or carry credit card balances for an extended period. If you use your tax refund to start an emergency fund it could help you stress less if one of those events were to happen.

Send it to savings

Did you know that the IRS allows you to split up your refund in up to three accounts via direct deposit? This is a perfect opportunity to stash some funds in a savings account that’s inconvenient for you to access, assuring that your money stays out of sight and out of mind until you actually need it. If you maintain an account at a credit union or bank  near a former residence without a branch nearby, augmenting your balance there can keep it safe from impulse purchases.savings

Pay off debt

If you have a credit card balance, consider using your tax refund to pay that off. It doesn’t make financial sense to put the IRS check for $3,000 in a fund yielding 1% interest and maintain a $3,000 balance on a credit card account charging 18% interest. Going this route really allows you to put more money in the bank every month once those minimum payments vanish from your list of bills.

Fund your retirement

What better way to stock money away for retirement than by using funds that aren’t a part of your paycheck anyway? You can use the funds to purchase or add a Roth or traditional IRA, which sequesters your money away for when you’re no longer on the job. At this point, you’ll be very thankful that you had the idea to save for retirement rather than spend it on something that you’ll probably forget about.

Look to the future

You aren’t the only one who needs to prepare for retirement. Your kids can also start to plan for their future right now! With the power of compounded interest, starting young is the best approach for well-funded golden years. Your child is allowed to contribute up to $5,500 for an IRA as long as they have that much earned income. However, you can be the one funding the account as long as they’re the one who earned the money, which is a win-win for anyone!retirement.jpg

Seed the college fund

If you have children or even grandchildren, one of the kindest things to do for them is save your refund in a college fund for their benefit! By setting up a 529 plan, you can help them afford a higher education in an era where rising costs leave many saddled with massive debt along with the diploma. In some situations, you may even be able to pick up a deduction on your state income taxes for your trouble.

Invest in the stock market

It has been known that the stock market has offered greater return on investment than savings accounts, CDs or bonds. While the fluctuations make it a risky choice for money, you’ll likely need in the coming months, the long-term outlook makes it a better option if you don’t have an immediate financial need. Pick individual stocks or select an index fund that moves up and down along the market!

Kick start your career

A tax refund could be just the tool that you need to take your career prospects to the next level. If you’ve been noticing that the co-workers getting promoted all seem to have experience working with databases or have excellent programming skills, the refund check can go towards tuition for courses in those subjects. By taking advantage of the Lifetime Learning credit, you might be able to use the costs of the course to take money off of your taxes again next year!young professionals

Prepay your mortgage

Making extra payments to your mortgage can be a great way to save money over the long term. Since so much of your payment on a long-term note goes to pay off the interest, reducing the principal can have a large effect over the life of the loan. Even an extra payment or two now can make a big difference in your future obligation the the credit union or bank.

Start a business

Did you know that you don’t have to quit your current job to start your own business? If you’ve always wanted to use your skills for finding treasures at yard sales into a business selling the finds online, or you would like to take advantage of the woodworking talent to craft and sell homemade furniture, a tax refund can provide the seed money to build up inventory, design a website or online store, or otherwise allow you to turn a hobby into a money-making enterprise!

Make home improvements

If you live in an older home, spending some of that refund around the house can lower your energy bills. By replacing old windows, you can actually improve the efficiency of your air conditioning in the summer and reduce the electric bill! What an awesome thing to take advantage of. 🙂 Old appliances can be replaced by models that use less energy. If your kitchen or bathroom is out of date, a remodeling project can improve the functionality of your house now and also make it more attractive when you do decide to sell!cliffs

Buy life insurance

Life insurance can be very easy to overlook, particularly for younger workers confident that they have plenty of time to worry about it! But, particularly for those who are married with families, a term life policy can provide protection for lone ones at a reasonable low cost. For the cost of a few hundred dollars, your tax refund can allow your family to maintain its standard of living if the unthinkable happens.

Happy saving!

-Lauren L.

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