Grundy Bank provides 6 tips to make the most of a tax refund

More than 100 million Americans received an average tax refund of $2,869 last year, and Grundy Bank provided six tips in a Monday news release.

“File as soon as you can get your tax documents in order to receive your refund more quickly and, most importantly, to prevent fraudsters from claiming your refund before you do,” said Kevin Olson, President & CEO of Grundy Bank. “Your tax refund can position you to handle financial emergencies and give you a jumpstart on achieving your goals, whether it’s paying off credit card debt or saving for a down payment on a new home of your dreams.”

1. Create a safety net. Many people do not have enough money in savings to cover a $400 emergency. A tax refund can be used for a dedicated emergency fund that will cover for needed funds in a crunch. According to the news release, people should have three to six months in savings in case of emergency,.
2. Pay down debts. Dedicate some of the tax refund to lowering any existing debt, such as credit card debt. Pay down existing balances either by chipping away at loans with the highest interest rates or by eliminating smaller debt first. People can also make an extra payment on your mortgage or student loans each year to save money on interest while reducing the terms of the loans.
3. Save for a child’s education. Look into opening a tax-advantaged 529 education savings plan to ensure school expenses will be covered when your child reaches college age, or save for future health expenses with tax-free dollars by investing in a Health Savings Account.
4. Grow the money with bonds. Invest safely with U.S. savings bonds or municipal bonds. The U.S. Treasury allows for savings bonds to be purchased using tax refunds for as little as $50. Savings bonds earn interest for maximum of 30 years.
5. Make home improvements. Use the refund to invest in home improvements that will save money over by increasing the value of thehome. This can include small, cost-effective upgrades like energy-efficient appliances that will pay off in both the short and long term, especially if they qualify for tax credits. Those with more substantial renovations in mind can talk to their bank about a home equity line of credit.
6. Donate to Charity. The benefit is two-fold: Giving to charity will make a difference in the community, and taxpayers can also claim the tax deduction if they itemize.

“Using your tax refund wisely can bolster your financial security,“ Olson said.“Having a plan in place before you receive your refund will reduce the temptation to spend that money on things you really don’t need.”

Grundyu Bank also encourages lower-income workers to file a tax return even if their income is too low to trigger any federal tax liability, in order to potentially claim the earned income tax credit. The EITC can result in a refund of up to $6,557 to help ensure financial security, depending on a person’s income, marital status and number of children.