Nobody likes paying taxes – but everyone enjoys getting a big, fat tax refund. And whether you’re looking forward to next year’s refund, planning for your delayed refund, or debating how to use your child tax credit, what you do with your refund is an important financial decision.
Should you use it to pay down your debts? Save it for a rainy day? Or should you invest your tax refund to start building a better financial future?
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Decide where to put your money
The first step in using your refund, of course, is deciding where to put it. You can start by taking stock of your situation. Ask yourself questions like:
- How’s my Financial Heartbeat®?
- Can I afford to deposit my refund into just one account?
- Do I have any high-interest debts to pay down?
- What does my FICO® score look like?
Once you’ve taken a long, hard look at your finances, you can start looking into spending, saving, or investing your tax refund.
What should you do with your tax refund?
If your tax refund is big enough, you might invest half and stick the rest somewhere else. If you’re still undecided, we’ve put together a list of things to do with your hard-earned money.
Invest your tax refund
One of the best ways to maximize your tax refund is to invest the money for your future. And with MoneyLion, you don’t need any investment know-how to succeed! You can get started in just minutes with one of our fully managed investment accounts and enjoy perks like:
- No fees to invest
- No investment minimums
- Recurring, automated deposits
- Round Ups to make the most of your spare change
- Thematic and personalized portfolios
Pay down debt
Getting out of debt isn’t always easy – but paying down a huge chunk of change at once can save you a small fortune in interest. If you’re staring down the barrel of high-interest debt, consider paying down your balance with your tax refund.
Build your safety net
Everyone should have a financial safety net for medical emergencies, leaky roofs, and broken-down cars. If you don’t have one yet, there’s no time like the present!
In fact, you can get started right now with a MoneyLion Safety Net. Get ready to enjoy banking, saving, investing, and even up to $1,000 in 0% APR InstacashSM advances all in one place.
Save for next year’s taxes
Sometimes, you just don’t know where your next dollar will come from – especially if you’ve gone from an office job to being self-employed. If that sounds like you, consider stashing your tax refund in a high-interest savings account or CD to ensure you can make your quarterly estimated tax payments.
Benefits of investing your tax refund
If you’re still on the fence about saving vs. investing, here are 5 reasons to invest your refund and kickstart your future.
1. Passive growth
When you invest your money, the market – i.e., stocks, bonds, and other investments – grows your money through capital gains (profits) and rising stock prices. And the best part is, you don’t have to lift a finger!
Unless, of course, your self-service broker makes you manage your own investments.
But if you’re not comfortable making your own trades, MoneyLion will do the work for you. All you have to do is sign up for a fully managed investment account, turn on auto investing, and let us take care of the rest!
2. Compound Interest
Compound interest is the interest that builds on top of interest.
When you invest your tax refund, your deposit begins to collect interest. The more you invest and the more interest that accrues, the more money you’ll have. This cycle continues until you withdraw funds from your account.
To maximize earnings on compound interest, it’s best to get started sooner, rather than later, and opt for an investment strategy that balances your risk tolerance against returns.
The effects of compound interest
3. Build your emergency fund
We noted above the importance of having a safety net to catch you when life happens. Building a well-stocked emergency savings fund is a crucial part of that safety net.
Unfortunately, most savings accounts don’t come close to generating the compound interest that the stock market can. And while investing your entire rainy day fund risks losing everything, splitting the difference between an FDIC-backed savings account and a fully managed investment account can help you grow your funds and your peace of mind.
4. Boost your retirement savings
Investing for retirement is one of the most important ways you can secure your financial future. And with the benefits of compound interest and passive growth at your side, you can accelerate your savings exponentially over the years, especially if you have a long way to go.
If you haven’t gotten around to saving for retirement yet, or if your account is sorely underfunded, there’s no time like the present to get to work! Fortunately, your tax refund makes an ideal nest egg to kickstart your savings or boost what’s already there.
5. Meet your financial goals
If you have lofty goals you hope to meet someday, but you don’t have the income to afford them yet, investing your tax refund can give you a solid head start. Once again, compound interest and passive growth are on your side. And even if you have a bad year now and again, history has shown that the market – eventually – will perform.
Invest in your future with a MoneyLion Crypto Account
It’s true that investing any money comes with a risk of loss. But with MoneyLion’s expertise backing your fully managed account, you can rest easy knowing that you’re taking a responsible step toward securing your future.
And if you’re ready to take a little bit of risk with your investments, it might be time to jump on the bandwagon with a MoneyLion Crypto account.
Anyone with a valid RoarMoneySM account can invest in Bitcoin and Ethereum with just a tap. And Crypto Round Ups makes it easy to build your cryptocurrency holdings pennies at a time, so you can start small and grow your investments with confidence.