Tax season gets a bum rap.
While tax day is often associated with having to pay the government, most people actually will receive a check compensating for money they’ve overpaid in taxes throughout the previous year. In 2015, the average refund was $2,893.
Adults usually direct this tax refund toward boring stuff like bills, but teens are free to spend this lump sum of money as they please, right? This is a free country, so technically, yes; but we suggest applying a bit of wisdom when it comes to your refund check.
But before you can start planning what you’ll do with your sweet, sweet cash, you should first know if filing a tax return is even necessary. Once you’ve got that straightened out, follow these five suggestions on how to use your tax refund wisely:
- Save for college
Nearly 70 percent of students are taking out loans to pay for college, and on average those loans amount to $33,000 per student. When you account for the interest, many people continue paying off student loans well into their thirties. By starting your own savings now, you could avoid or diminish the realities of this inconvenient, postgraduate truth.
- Pay down debt
The average U.S. household carries $15,762 in credit card debt. While you shouldn’t have nearly that much as a teen, you’d be surprised how quickly it can pile up. If you have a credit card with even a small amount of debt, using your refund check to pay it off is a smart move. Not only does it help you prevent the dreaded black hole of debt, it also improves your credit score — win-win.
- Start an emergency fund
The definition of an emergency is a serious, unexpected situation, which is why you ought to plan for one ahead of time. If you don’t have money saved, the effects of a serious emergency (e.g., a medical emergency) can be compounded. Only 51 percent of Americans have enough cash in their emergency accounts to clear themselves of credit card debt. Be like the other 49 percent.
- Buy something useful
This may come as a shock, but when you move out of your parents’ house you lose the use of all their things. From food to paper towels, these are things you’ll need to budget for as an adult. Even more pressing is the fact that items you need like cars and computers tend to need repairs and you’ll have to cover the costs. Use your refund check now to upgrade any item you simply will be lost without.
What’s the only thing better than having money? Making more money with it! Investing is no doubt complicated, but there are very safe ways to invest money. Not only will it boost your bank account, it will also prevent you from spending it frivolously.
For more info on jumpstarting a better tomorrow with your refund check, read this post from H&R Block Talk.