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It’s Income Tax Refund Season: To Stash It or to Splurge It?

April 07, 2017

1 min read

Are you one of the majority of Americans who has already received or is expecting to receive an income tax refund? The big question is, what are you going to do with it?

A 2017 poll conducted by the financial news site GOBankingRates.com found that of those expecting a return, 41% planned to put the money in savings. Thirty eight percent intended to pay off debt, and only 21% planned to splurge, make a major purchase, or put the money toward a vacation.

Consider investing your income tax refund

We get it, splurging on trip to Tahiti is tempting. But think of this way: Stashing, and not spending, your tax return in an ETF could help you relax a little more in years to come.

According to 2015 data from the Internal Revenue Service, the average return was $3,218.  If you invest $1,500 of your tax return every year for the next 30 years, at an average 7% return (the historical average of the S&P 500 over the last 30 years, not adjusted for inflation); 30 years from now, you could have $109,780.

Now we aren’t saying investing is the only (or even best) way to use your refund. However, it’s definitely something to consider. Paying down debt is important, and you might really need that vacation. But it might be wise to consider the benefits of investing when you get that check from Uncle Sam.

What’s the Stash team doing with their tax refunds?

In a quick, and totally informal, poll of the Stash office, we discovered that employees are planning on using their income tax returns in a variety of ways.

Other plans include: Paying off student loans, upgrading appliances, buying furniture, summer camp for the kids, and yes, vacations to warmer locales. And yes, investing.

One team member is even putting his income tax return toward his honeymoon. A good investment indeed. 

 

By Clare Edgerton

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