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Managing Your Money

What to do with your tax refund.

What to do with your tax return.

While gathering the information to file your taxes can sometimes be as painful as pulling teeth, reaping the rewards in the form of a nice tax return from the Canada Revenue Agency (CRA) can make the pain worth it

A refund can feel like an unexpected gift from Santa. Once you receive your return, your knee-jerk reaction may be to spend it on a new spring wardrobe or hop on a plane to “anywhere warmer than here!” It’s basically free money, right?

Well…kind of. Your tax return is a portion of your hard earned dough that the CRA has simply been ‘saving’ for you. It’s totally fine to spend a small chunk of that money treating yourself (read: 5-10%), but being smart with your refund will put you in a way better position financially in the long term. Here’s some financially savvy ways to use your tax refund.

Put it towards retirement.

Start or grow your RRSP investments with your return. Remember that the contribution amount to this account is deducted from your gross income, which potentially lowers the tax you pay on your income today. So by using your tax return for this purpose, you’re getting a head start on additional tax savings for the deduction you’ll claim in the future.

Invest it.

You can make your money make more money by putting your tax refund towards an investment. This includes things like an RRSP, RESP, or TFSA. You could also use it to buy a term deposit sheltered in a tax-free savings account.

Kick-start an insurance policy.

Most people don’t really know they need insurance. Until they do. Get ahead of the curve and prepare yourself for any future hiccups by starting a life or home insurance policy. It’ll help you take care of you and your loved ones by providing cash flow for them in the event something happens to you or your property.

Pay down your mortgage.

Putting a lump sum down on your mortgage will help pay it off sooner. If you’re a new homeowner this option might be best for you because it’ll reduce the principal early on,  which means less interest paid over the life of the mortgage.

Pay down other debt.

There’s a difference between good debt (mortgage debt or student loan debt, for example) and ‘bad’ debt. Credit card debt or other kinds of high interest debts fall into the ‘bad’ category. Use your return to pay off some of that ‘bad’ debt, starting off with the highest rate first.

Put it towards home improvements.

Use the money to invest in your home. Grow your equity by making needed repairs or renovations that’ll pay off in the long run. Replace loose windows and doors, add insulation, or switch to energy efficient appliances to save on bills. New fixtures like this will also yield more return and increase the appeal of your property if you decide to sell it.

Put it towards a rainy day fund.

Many Canadians don’t have adequate savings that they can access in the case of a sudden financial emergency, like job loss, a medical emergency, major house repairs or other unexpected surprises that impact your wallet in a big way. It’s recommended that you have three to nine months of living expenses saved up for all of those ‘what if’ moments (also known as your emergency fund.) Use your tax refund to start or add to an emergency fund so you’ll have peace of mind if anything unexpected happens.

Invest it into yourself.

Knowledge is power. If there’s a course, certification or professional development opportunity that you’ve been itching to take but couldn’t justify the financial sacrifice before, why not use your return to benefit your long-term career goals?

Still can’t decide?

No worries. Our financial experts can help you determine the best option for you. Or, if none of these options apply, they’ll take some time to understand your situation so they can build the right plans to get you on your way to your goals. Give them a shout.



Coast Capital Savings Federal Credit Union provides advice and service related to deposit, loan and mortgage products. Coast Capital Wealth Management Ltd provides investment and financial planning services. Coast Capital Financial Management Ltd. provides advice and service related to segregated funds, annuities and life insurance products. Worldsource Financial Management Inc. provides advice and service relating to mutual funds. Mutual fund values change frequently and past performance may not be repeated. Commissions, trailing commissions, management fees and expenses may all be related with mutual fund investments. Important information about mutual funds is contained in the relevant fund facts and simplified prospectus. Please read the fund facts carefully before investing. Only deposits held in Canadian currency, having a term of five years or less and payable in Canada are eligible to be insured under the Canada Deposit Insurance Corporation Act.

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