People should always have a plan set up for when they receive their tax returns, so they don't spend it on unnecessary things. Here are five wise ways to spend the money.
Use the money to pay off high-interest debt. It doesn't matter if it's a credit card with a 20 percent interest rate or a car loan with a 9 percent interest rate; investing in equities or other conventional assets wouldn't provide as big of a return as reducing high-interest debt would, according to Family Finance Source. Also, paying off debt has no uncertainty or volatility.
Money from tax returns can also be put into an emergency fund. Putting all of the money in an emergency fund is an easy way to increase family savings, according to Family Finance Source. Families may even be able to use the fund when they're retired.
Investing the money is also a good idea, according to Family Finance Source. Investments help people to be more self-reliant and can provide a more secure future.
Even if kids are in their infancy or not in the picture yet, saving for college is a great way to use the money. College expenses are going up 2-3 times the rate of inflation each year. A lot of banks offer college-specific bank accounts with low fees and high interest rates, according to Family Finance Source.
There's nothing wrong with spending the money on yourself, according to Family Finance Source. But to maximize the benefits of your return, spend the money on an experience the whole family can enjoy instead of just an item.
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