People will focus on paying down credit card debt and bills over travel, home renovations and mortgages
TORONTO, April 30 /CNW/ - Canadians have until midnight today to file their 2009 tax return. According to the Canada Revenue Agency, the average tax refund received last year was approximately $1,400. How will Canadians use their tax refunds this year? According to a recent survey commissioned by BMO Nesbitt Burns, nearly half (48 per cent) will be putting that refund towards paying credit card debt and other bills.
The Leger Marketing survey also found that:
- Twenty-one per cent of Canadians are planning to invest their refunds
in RRSPs and TFSAs
- Fifteen per cent are planning on using their refunds for home
renovations or household expenses
- Twelve per cent will be using their refunds for travel and/or leisure
- Only four per cent of Canadians plan to use their refunds to pay down
"There are several good uses for your tax refund. How you use it depends on your personal situation," said John Waters, Manager, Tax Planning, BMO Nesbitt Burns. "A BMO Nesbitt Burns advisor can help you determine how to best put your refund to work for you by developing a financial plan that addresses your individual needs, including debt reduction and investing for retirement."
BMO Offers Top Five Tips On How To Make Best Use Of Your 2009 Tax Refund:
Pay down your RRSP loan or make your 2010 RRSP contribution now
If you took out a BMO RRSP Readiline loan to maximize your RRSP contribution and generate a larger refund, use your tax refund to pay down the loan. If not, consider making your 2010 RRSP contribution now instead of waiting until the deadline next year. This will allow you to benefit from almost an extra year of tax-deferred growth!
Pay down credit card debt
Interest on some credit cards can eat away at your savings. Reduce the cost of credit by using your tax refund to reduce or pay down your credit card balances, targeting the highest rates first.
Lump sum mortgage payment
If you have a mortgage, it is a good idea to use your tax refund to make a lump sum payment. Applied directly to your principal, a lump some payment (BMO allows you to pay up to 20 per cent of your original mortgage principal per calendar year) could save you significant dollars in interest costs over the life of the mortgage.
Top-up your TFSA
If you are not carrying any extra debt then make your refund work for you. Contributing to a Tax-Free Savings Account (TFSA) can let you grow your money tax free. Even if you maxed out your TFSA contribution in 2009, you have room for an additional $5,000 this year.
Save for education
An education can be an expensive thing. Contributing to a Registered Education Savings Plan (RESP) can help alleviate some of the pressure that all parents feel when planning for their children's future. Consider opening an RESP using your income tax refund. A $2,500 dollar contribution to an RESP can earn a $500 grant from the government. Maximize your contributions every year and you could earn up to $7,200 in lifetime grants for every child.
SOURCE BMO BANK OF MONTREAL
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