– Family Tax Refund

9 Ways to Put Your Family’s Tax Refund to Work

Is your family getting a tax refund this year? Our guest blogger, Rachel Namoff from Arapaho Asset Management, shares her advice for using the money to reach your family’s financial goals.

It’s tax time and that means your family may be getting a refund. As parents, we are always thinking of ways to maximize our resources: coupons, secondhand clothes, free days at local attractions and even staycations. Using your tax refund wisely could also make your hard earned money work harder for you.

First off, let me say, I am a fan of adjusting your W-4 to accurately reflect your actual deductions. I mean, getting a tax refund is great, but isn’t getting a bigger paycheck all year even better? That little extra for family needs and wants each month could make a big difference.

If you are getting an income tax refund, however, what are your plans for the money? Here are some financially fit ideas:

  • Pay off debt: Think about paying off overdue bills, loans or credit cards first. If you have high interest debt, you are eroding your wealth potential. Not only will you be using your tax refund to decrease your debt, but you will be decreasing your interest as well.


  • Pre-pay your mortgage: Using this strategy, you can pay off the principal on your mortgage more quickly and save interest payments over time. You can do this by specifying that the additional money you’ve included in your payment is for principal. You are potentially saving yourself thousands.


  • Pay down high interest student loans or car loans: Applying your refund to high interest loans is an awesome way to save on some of that sluggish interest. The quicker you can pay down the balance, the less total bill you will have over time. Make sure the payment goes toward the principal, by specifying with your payment that the additional funds are for principal.


  • Save for retirement: If you are smart and savvy and debt free, pay yourself directly. Put your refund into savings. Be aware, not all savings are created equal. Contributing to an IRA will give you a step up at retirement. A Traditional IRA will give you tax breaks now and a Roth IRA gives you tax breaks when you retire. Add a little padding to your financial future now.


  • Jumpstart college savings: Do you have children that will attend college someday? A 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. Colorado offers 529 Plans with state tax advantages, such as deducting current year contributions and realizing tax free withdrawals if used for qualified educational expenses. 529 Plans are a great place to put a surprise windfall, and experience additional revenue paying you forward through tax savings and growth potential. More information on 529 plans at


  • Invest: Put your money to work in any form of high interest savings accounts or maybe buy a share of stock in your favorite company. This is a great way to make your refund go further because now you have an investment!


  • Build an emergency fund or vacation fund: Both of these options are making your money work for you, rather than the other way around. They also provide peace of mind and stability for life events or unexpected expenses at a later date.


  • Fund your dream: Another great option is to invest your refund directly in your own efforts or dreams. Start or invest in a business, take a college course, learn a new technical skill or advance your career. Your family will thank you for it.


  • Diversify: How about a little bit of everything? If I have gotten your mind swirling, don’t fret. You can use your refund for all or some of these options.


And lastly, if your heart is set on indulging, find that amazing electronic, latest toy or awesome pair of shoes and then wait 24 hours before you buy it. Take the day to think about whether the item will truly bring your family joy and whether it’s really where you want to put that money. Often, the impulse item itself is not what we are looking for, but instead we crave the feeling of excitement that comes from the purchase. Consider whether this purchase will fit with your family’s goals. If we are truly reaching our goals and fulfilling our lives, the impulse item is not always as appealing.

Mindfully contemplate where your family’s tax refund will best be used. When we are helping ourselves by maximizing our purchasing power, we can truly enhance our lives, and isn’t that the definition of our money working for us?