The battle for your cash is on. A recent survey for the newly re-branded Tangerine found that 59% of Canadians expect a tax refund this year with 37% banking on a refund of $1,000 or more. It’s no wonder online banks including Tangerine as well as PC Financial have both announced 2.5% promotional interest rates on new deposits until June 30 to coincide with tax refund season as well as the closure of Ally bank by RBC on April 30.
While 2.5% looks at least twice as good as the typical high interest savings account, I wouldn’t recommend moving your money because of it. The extra interest on a new $5,000 deposit will only net you an extra $25 or so between now and June 30.
Having said that, if you were looking to open a high interest savings account with an online bank anyway, now is as good a time as any. Be sure to choose the TFSA version of the high interest savings account if you still have contribution room to maximize the benefit.
If you don’t need the money in the short term however, consider investing it in an RRSP for even greater tax efficiency or investing the funds within your TFSA to increase your chances of at least outpacing inflation.
Of the 56% of Canadians awaiting a tax refund, more than half (56%) plan to save it for things like retirement and emergencies, mostly with a regular savings account, Tangerine found. Only 28% plan to park their refund in a TFSA.
The other 44% plan to use their refund to pay down debt, take a vacation, pay the bills or renovate part of their home.
Not sure what to do with your tax refund? Here are three ways to use it wisely.