Are you expecting a tax refund from the IRS this year? Many Americans get a tax refund from the IRS regarding tax time, especially parents with children who qualify for the Child Tax Credit.
Tax planning aside, it is exciting to get a lump sum of money from the government! However, when you see that sum hit your bank account, you may be tempted to take that check and blow it all on your next vacation but hold yourself back from spending it all.
Take that money and decide to use it in a way that will benefit you, your children, and your financial future. Set yourself up for financial success with these ideas.
10 Ways to Use Your Tax Refund to Ensure Financial Success
1. Pay Off Debt
Having consumer debt holds you back from moving forward. It can be hard to future-facing when you are held back by large amounts of debt. However, paying off debt is one of the biggest and best ways to help improve your financial future and ensure financial stability.
Kids will benefit from their parents having a stable financial situation. If you have significant amounts of debt, mainly if the loans are predatory or causing a lot of stress, your priority should be paying these off.
2. Add Money to Your HSA (if you are eligible)
Do you have access to an HSA? You can use an HSA for many things besides the regular medical expenses. For example, kids need glasses, braces, sunscreen, diapers, wipes, formula, and other things your HSA may cover. If you don’t have access to one, consider starting a separate savings account to save for these significant expenses that come up fairly regularly in young children’s lives.
3. Put Money in a 529 or UTMA
Did you have a lot of student loans? Do you know anyone struggling with large amounts of student loan debt? Do you know anyone who gave up one educational opportunity due to finances? Do you want the same for your kids? I thought not. Putting money into a 529 account or a UTMA gives your child a good start in adult life. One of the most significant gifts you can give your child is setting them up for a successful future.
4. Prepare for the Future
I know how it is. You know you need to make a will and buy life insurance, and you will get on it as soon as you have the time and the money to pay for it. Well, the time is now, and the money is here. No parent wants to think about the worst happening, but as parents, we must think of our kid’s future and well-being- especially if we may not be there to take care of them.
5. Get Your Child Tutoring Help
Tutoring can be an expensive endeavor. It is a great way to make some quick cash if you do the tutoring. It’s less fun when you are the one paying for tutoring. If your child needs a little extra help, then now is the time to take advantage of this extra money to make it happen. Getting your child extra help as early as possible will help them even more later.
6. Pay For Extracurricular Activities
Studies show that extracurricular activities can help a child’s brain development, self-esteem, thinking skills, and responsibility. Taking extra lessons in art, music, or sport can help any child and be particularly good for a struggling child. Help your kids do enjoyable activities out of the classroom by participating in a sports league or taking lessons in something that interests them. Since extracurricular lessons are usually quite expensive (and don’t forget the cost of equipment!), this can be a chance for your child to learn or try something new.
7. Buy Books
Reading is important for kids. Kids who own their books tend to do better in life and are usually more successful. While you can get free books for your kids from a few programs, building up your child’s library usually takes more than that. Spending money on books that your kids want to read or your kids to read is always a great use of money! If you are looking for some book ideas, you can check these books out!
8. Stock Up Your Emergency Fund
Are you prepared for what life throws out you? Some of the most common stressors in life (unemployment, relocation, natural disaster) are often easier to deal with by being prepared financially. Having a robust emergency fund is one of the most important things you can do for your financial security. Start by saving $1,000 and moving on from there. Your kids will thank you for taking care of this now and having a cushion to fall back on when things don’t go exactly to plan.
9. Top Off Some Sinking Funds
Do you have sinking funds? Having money put aside for the expected, occasional expenses can help a family smooth out its budget. Clothing, summer camp, dentists, car repairs, schooling fees- these are all scheduled events that are not easy to swing on a month-to-month basis. (Try paying for all those back-to-school supplies on your extra spending money- it doesn’t work!). Setting aside money in a separate account for these needs is a great way to make sure you have the money available when you need it.
10. Set Aside Money For Retirement
One of the best ways to ensure you and your children see financial success is to plan for the future correctly. While you can, and should, speak to a tax professional to plan your taxes properly, including how to save for retirement in the best possible way, you can start saving for retirement now. Your Tax Refund may not be eligible for the tax benefits of a retirement account, but you can use this money for your regular expenses and your earned income for your retirement fund.