Ways of making your tax refund work for you

Photo: Castanet file

There are plenty of financially beneficial ways to use your tax refund.

Almost 20 million Canadians receive a tax refund each year.

If you’re one of those who received, or are about to receive, a refund, you might wonder what to do with the extra cash.

The average refund in Canada hovers around $2,000, and while many people instinctively spend it on travel or shopping, there are some more strategic—and even fun—ways to put that money to work. Here are a few unique ideas to consider:

Start a micro-business or “side hustle”

Have a passion project you've always wanted to explore? Your tax refund could be the seed money to test a small business idea, whether it's selling handmade goods online, starting a tutoring service, or launching a podcast. Use the funds for a basic website, business cards, or initial supplies. Even a modest investment can help you generate income and build something meaningful outside your day job.

Prepay some of your future self-care expenses: Self-care isn’t just a trend, it’s essential. But massages, therapy or fitness classes can be expensive when paid out-of-pocket. Consider using your refund to buy a package of yoga classes, therapy sessions or even prepay for a year’s worth of dental cleanings or vision care not covered by insurance. You’ll reduce future stress,both financial and mental.

Invest in energy-saving upgrades

Want a refund that keeps on giving? Use your tax return to invest in your home, particularly in energy-efficient upgrades. Think programmable thermostats, weather stripping or even a low-flow showerhead. These changes are relatively inexpensive but can reduce utility bills and environmental impacts over time. If you're eligible, look into government rebates for energy-efficient renovations to stretch your refund even further.

Open an RESP for a child in your life

Even if you’re not a parent, opening a Registered Education Savings Plan (RESP) for a niece, nephew or godchild is a powerful gift. The government offers a 20 per cent match on contributions through the Canada Education Savings Grant—up to $500 per year. A $1,000 refund contribution becomes $1,200 instantly and over time, it can grow significantly with compound interest.

Take a course that advances your career

Use your refund to invest in yourself by taking an online course or certification that boosts your earning potential. Whether it’s learning a new tech skill, brushing up on financial literacy, or taking a leadership course, this kind of investment can open up new career opportunities and future raises or promotions.

Tackle one financial pain point

Most Canadians carry some form of debt and while using a refund to pay down a high-interest credit card is always a good choice, consider targeting a specific financial stressor. For example, paying off the last bit of a lingering student loan or car loan can free up monthly cash flow. You might also use it to build a $1,000 emergency fund if you don’t already have one, which is often more motivating and useful than making a small dent in a larger debt.

Create a “fun fund”—with boundaries

There’s nothing wrong with enjoying your refund. In fact, it might be exactly what you need. The trick is to be intentional. Set aside a portion (say 20 per cent) for guilt-free spending on a weekend getaway, concert tickets, or a fancy dinner. You’ll enjoy it more knowing the rest of your refund was used wisely.

A refund is a tool. Use it well

While it may be tempting to treat your tax refund like free money, it’s more accurately a return of your own hard-earned cash. Treating it with the same care as your regular income, or better yet, seeing it as an opportunity to create future value, can make a real difference in your financial life.

So, whether you use it to build your future, improve your well-being, or spark a new beginning, make your tax refund work for you this year.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.