Your tax return is coming (or is here), do you know what to do with it?
As tax season comes to an end, people across the country are frantically working to meet the April 18th deadline. While it's mostly viewed as an unavoidable part of life, it does provide a glimmer of joy in the form of a tax return check. However the question arises, what do you do with your tax return? One idea would be to place the funds into some type of savings.
Option 1: The Traditional Savings Accounts
Traditional savings accounts are a safe and effective way to deposit your tax return. Putting some of your tax return into a savings account is a nice way to get into the habit of saving. There are some savings accounts that are more specialized in nature. For instance, FFCU's Christmas Club is a savings account that has a higher interest rate while restricting withdrawals till the start of the holiday season. Your tax return check can help jump start any of the traditional savings accounts while increasing the mindset to save.
Option 2: A Certificate of Deposit (CD)
Another option for your tax return is a Certificate of Deposit, otherwise known as a CD. A CD is a fixed savings account where the interest is based on the balance and term of the account. This is a type of savings for those looking to save up for a few years towards a new car or house. Since the rates vary based on balance and length, it promotes long-term saving. For example FFCU's 12-month CD has two different rates based on the amount deposited.
- 0.75% with a minimum balance of $1,000
- 1.000% with a minimum balance of $5,000
Keep in mind that rates are subject to change at any time, so make it a point to check every so often for higher return rates and promotions.
Option 3: IRA - The Long-Term Plan
One day I would like to retire and relax comfortably for the rest of my life. To obtain this dream I have to start saving now and as much as possible. This is what led me to take a serious look into putting a majority of my tax return towards my IRA. An IRA is an account that is used for retirement savings. The more you put into it over time the more you will have when retirement finally comes.
Now I can't tell you which is best, but our financial experts can. If you are considering using an IRA as a place to deposit your return, I highly recommend talking to one of our financial experts first to find the right type of IRA. Whether it is a traditional or Roth, starting an IRA is good way to make sure you have some financial stability when retirement comes.
Deciding what to do?
It took me some time to finally decide on putting most of my return into a traditional savings account. Since I have a big trip coming up at the end of the year, it makes sense for me to start putting away money now. Take some time to think about what your savings goals are and how long you are looking to save those funds. This tax season consider saving over spending your refund.