Are you receiving a tax refund this year? There are several advantages to reinvesting that money. Of course, you could use it to treat yourself or your family but consider how contributing the tax refund to your Tax-Free Savings Account (TFSA) or your Registered Retirement Savings Plan (RRSP) could work for you.
Speed up your projects
A TFSA is a great option if you are looking to save for a short- or medium-term project, such as renovations or a major purchase. When you invest money in your TFSA and place it in a Bâtirente fund that suits your risk tolerance, you will also grow your investment.
With a TFSA, you can also start or increase your emergency fund to help you handle unexpected circumstances. The best practice is to save the equivalent of 3 to 6 months of your usual expenses.
Contributing to a TFSA also gives you great flexibility:
- Your investment earnings are tax-sheltered.
- Your withdrawals are tax-free.
- Your money is available at any time.
Reach your retirement or savings goals faster
By contributing part of your tax refund to your RRSP, you will receive another tax refund next year. In other words, your contribution reduces your taxable income, which increases the likelihood of receiving a refund next year, which you can then reinvest in your RRSP when you receive it, and so on.
Plus, you will reach your savings goals faster by increasing your RRSP contributions. You can also use your unused contribution room from previous tax years.