
Finance for Humans
Two Genius Moves to Make With Your Tax Refund
If you’re among the millions of Canadians getting a tax refund this year, you have a choice to make. You can spend that money, which would be fun. Or you can turn it into more money, which would be smart.
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According to the CRA, the average tax refund this year is $2,072 — almost a 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 put it toward something smart.
While buying a new TV or a diamond-encrusted collar for your pet ferret might feel like the right thing to do, there are other moves that future you will appreciate even more. The first is paying down high-interest debt. Credit cards can charge interest rates of 20% or more, which will devour any gains you’d make somewhere else. After that, it’s choosing between two things: saving your money in a high-interest savings account or investing it — especially in a tax-sheltered account like an RRSP, a TFSA, or the new FHSA. By putting off the fun right now, 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. We asked Scott Simpson, a Wealth Advisor at Wealthsimple, to walk us through the options. And then we made some charts.
Option 1: Invest It

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.
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But if you don’t think you’ll need your money in the short term, Simpson suggests investing in a medium- or higher-risk portfolio. Our Growth Portfolio gives you greater odds of earning higher 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. (We can help you pick the right one for you here.) Soon, you’ll also be able to invest in the new First Home Savings Account, which helps you save up to $40,000, tax-free, toward the purchase of a new home. (If you’re interested in a Wealthsimple FHSA, you can sign up here and we’ll notify you as soon as accounts are available.)
Option 2: Save It

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. Our high-interest savings portfolio, for example, currently has a yield over 4%. And our Cash account has an interest rate of 4% if you invest $100K with us. 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.