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With the exception of accountants, I don’t think anyone enjoys tax season. But with the personal tax deadline quickly approaching on April 30th, it’s something we can’t ignore. On a positive note, 57% of Canadians are anticipating to receive a tax refund, according to a recent TD survey.

Of those anticipating a refund, 61% say they expect to get back to up $1,499. This may seem great at face value, but that just means we’ve given the government an interest-free loan and they’re simply returning the money.

Some people think of their tax refund as “free money” but when used effectively, that extra money can go a long way. According to those surveyed, the top three financial goals for Canadians are as follows.

  • Paying off credit card debt - 32%
  • Contributing to an RRSP or TFSA - 21%
  • Adding to their emergency fund - 28%

Setting Spending Priorities

One quick note: some people try to maximize their RRSP contributions to get a bigger tax refund, but if you have credit card debt, it makes more sense to just pay that down first so you can avoid paying the insanely high interest charges.

"There are many ways to use your tax refund based on the priorities you face in your life stage” says Linda MacKay, senior vice president of Personal Savings and Investing at TD Canada Trust. "While you can spread it across several different financial priorities, you can also consider allocating the full sum towards one or two goals to fully maximize the returns' potential."

How to spend your tax refund based on your life stage

The new grad: Pay off any high-interest debt first (this applies to all life stages); the odds are your student loans (if you have any) have a favourable interest rate so you don’t necessarily need to rush to pay that off. You’ll also want to start building an emergency fund (again, this applies to all life stages), don’t get tempted to spend your refund - now is the time to build a solid financial foundation.

The young couple: Your wedding, honeymoon and home down payment are the obvious things to allocate your return towards but don’t be afraid to spend it on a vacation. Sound odd coming from a personal finance expert? As long as you always planned on using that money for your trip, I don’t have a problem with it.

Parents with young children: If you’re currently on maternity leave, your tax refund will definitely help with day-to-day expenses. Admittedly, managing cash flow can be tough for new parents but at least you now qualify for new tax breaks. Once your finances are in order, consider using tax refund to help fund your child’s RESP. With the Canada Education Savings Grant, the Government will match your contribution by 20% up to a maximum of $500 every year.

Those with adult children: Assuming the kids have moved out (and they’re no longer asking you for money), any extra funds can be used towards your retirement savings. If your nest egg is already in good shape, don’t be afraid to spend this money on travel. No one knows how their health will be so travel while you’re still physically able to.

The Final Word

Although getting a tax refund is nice, you should never depend on it when planning your finances. Instead, treat your finances as a lifelong event that requires changes depending where in life you’re at. If you need help with your finances, don’t be afraid to seek out help from a professional.

How do you plan to use your tax refund? Tell us in a comment.

Barry Choi

Barry Choi is a personal finance and budget travel expert at He has been quoted by media in Canada and the United States including The Financial Post, The Toronto Star, Business Insider, The Globe and Mail, and has appeared on HuffPost Live.

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