6 Smart Ways to Use a Tax Rebate
Using a tax rebate for retirement savings is ideal because it doesn't affect today's cash flow. Here are 6 things you could consider doing with a tax rebate in order to move yourself forward financially:
1. RRSP
Contribute it back to your RRSP. This not only continues to build your retirement fund, but takes full advantage of the tax-deferred growth opportunity, which is one of the key benefits of this account. Plus, it will help generate a tax rebate for you next year too.
2. TFSA
This account is ideal for both retirees and those still working. It's the perfect place to invest for mid- to long-term growth, whether that be for retirement, a cottage, a vehicle, major travel, cash gifts or otherwise. The flexibility this account offers is amazing and everyone should be using it. Here's more information on the benefits of the TFSA.
3. RESP
Saving for your kids' education? Consider contributing the rebate to the RESP, which will earn you a 20% guaranteed match. That's a pretty great return on your investment. Grandparents, anyone can contribute to this account, including you. Kids can earn up to $7,200 in grant money, but only if contributions to the account are made.
4. FHSA
Like the RRSP, a contribution to the FSHA will earn a tax deduction for next year's tax return. For anyone saving to buy a home, this is a smart place to contribute money from a tax rebate. (This is also a great account for grandparents to contribute to).
5. HISA
Saving for something specific in the short-term? Consider depositing the money into a high interest savings account. This ensures the money is there when you need it. This is the best way to avoid debt (like charging a vacation to a credit card!) and achieve your spending goals.
6. Pay Down High Interest Debt
If you have high interest debt like a credit card balance or line of credit, consider using your rebate to make a lump sum payment. This will immediately reduce the amount of interest you're paying. This in turn, gives you the advantage of contributing more of your payment toward the principal, moving you closer to paying it off.