Article hero image
Illustration by Wealthsimple

How to 10x Your Tax Refund (Without Breaking the Law)

Wealthsimple makes powerful financial tools to help you grow and manage your money. Learn more

According to the CRA, the average refund for 2023 taxes is $2,196 — one hundred dollars more than last year. Take that, inflation! And while it’s nice to have a little extra cash, every refund comes with a choice: blow the money on something fun or let it grow (and grow).

While buying a new TV or a diamond-encrusted collar for your pet ferret might feel like the right thing to do, it’s not that financially sound. By investing your money — especially in a tax-sheltered account like an RRSP, TFSA, or FHSA — or, to a lesser extent, saving in a high-interest savings account, you give yourself the best chance of having more money later. Your ferret will thank you.

The best choice for you depends on your personal circumstances, of course, along with your tolerance for risk. Here’s how to think things through.

Option 1: Invest It

Investing your tax refund can lead to a lot more growth than putting it in a chequing account.

If you’re planning on buying a house or making another big purchase (a second ferret?) in the next three years, you’re probably better off skipping to the saving option below.

Recommended for you

  • And six other things you need to know to do this tax season right.

    You May (Still) Have to Pay Taxes on COVID-19 Benefits

    Finance for Humans

  • Should You Buy or Rent? A Quick Formula to See

    Finance for Humans

  • It might seem like this is a crazy year to start doing your own taxes. But, for most people, it’s actually the perfect time. To illustrate how easy-breezy it is, we made this quick guide to using Wealthsimple Tax.

    Is This the Year to Try Wealthsimple Tax? (Um, Probably. Yes)

    Finance for Humans

  • What You Really Need to Know About IPOs

    Finance for Humans

But if you don’t think you’ll need your money in the short term, a medium- or higher-risk portfolio increases your odds of earning high returns. And with the longer investment timeline, if there is a downturn, your portfolio still has ample time to recover.

The only question left is where to put your investments. A TFSA or an RRSP is often your best option, since they’re both tax-sheltered and will save you a lot of money. If you’re interested in buying your first home, a FHSA actually combines the tax savings of both. (For a flowchart to help you choose among the three, click here.) 

Option 2: Save It

Instead of putting your tax refund in a chequing account with 0% interest, you can put it in a high-interest savings account — and watch it grow.

Say you really need that renovation or you’ve put off your wedding long enough that your in-laws are on the verge of cutting you out of the family before you’ve technically even joined it. If that’s the case, you’d be wise to put your tax return into a savings account. And not just any account: you need a high-interest savings account.

One of the benefits to consumers of the last year of interest rate hikes is that some savings accounts now offer exceptional interest rates, often 4% or higher. It’s not quite what you can expect to make in the market, but there’s little to no risk. And it’s a ton better than letting money sit in an interest-free chequing account — or around the neck of your favourite ferret.

Wealthsimple uses technology and smart, friendly humans to help you grow and manage your money. Invest, save, trade, and even do your taxes in a better, simpler way.

Money Diaries

"MY UNDERGRADUATE ADVISER TOLD ME I SHOULD JUST FORGET ABOUT THE WHOLE WRITING THING. ‘YOU SHOULD FIND A GOOD MAN AND GET MARRIED,’ HE TOLD ME."

Margaret Atwood

TLDR Newsletter

Business news made simple

Sign up for our weekly non-boring newsletter about money, markets, and more.

By providing your email, you are consenting to receive communications from Wealthsimple Media Inc. Visit our Privacy Policy for more info, or contact us at privacy@wealthsimple.com or 80 Spadina Ave., Toronto, ON.

  • Illustration of a tax form placed inside a bear trap

    Finance for Humans

    Five Tax Traps — And How, If You Start Now, You Can Avoid Them

    It may seem early to think about taxes. But if you do a few relatively easy things right now, you can (hopefully) avoid a tax nightmare in the future.

  • Illustration by Melanie Lambrick

    Finance for Humans

    Why the Asset Bubble Popped, All at Once

    A decade-long market frenzy came to a swift, painful end this year. We asked Philip Grant of Grant’s Interest Rate Observer — a financial newsletter that was one of the first publications to warn about the 2008 financial crisis — to explain why stocks and bonds tanked in tandem.

  • Wealthsimple

    Grow your money

    Smart investing tools and personalized advice designed to build long term wealth.

  • Finance for Humans

    Nine Ways to Be Smart When the Market Goes Down

    Smart investors don’t try to avoid downturns, which are inevitable. Instead, they make sure they’re in a good place when the markets go back up. Because that’s inevitable, too.

  • Finance for Humans

    Why Most Eco-Friendly Investment Funds Really Aren’t That Eco-Friendly

    There are a whole bunch of investment portfolios that claim to be socially responsible and environmentally benevolent. The trouble is that it’s super tough to pick a fund that delivers on its promises.

Wealthsimple

Grow your money

Smart investing tools and personalized advice designed to build long term wealth.

Get startedright arrow icon