Australian savings behaviour
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Many people are already planning what they'll do with their tax refund money. Shopping? Holiday? Bills?
We've spoken to a couple of experts and thought we'd share a few ways to help you either save those funds wisely, or get the most out of your shopping spree.
The Australian Tax Office estimates the average tax return is over $2,000*. Heritage's Head of Wealth Management, Richard Herbst, says most people treat their tax refund money as a windfall and blow it. "There are some really smart ways to use tax refund money, depending on your circumstance. The obvious ways are through reducing any personal debt, or saving it."
1. Reduce your home loan
If you have a 25 year home loan, a one-off $2,000 lump sum repayment on a $300,000 loan at 5.19%pa could save you over $4,000 in interest over the life of your loan (without including any costs that may be incurred for lump sum payments), and would end your loan term three months earlier1.
2. Pay off your credit card
The average Australian credit card debt is $4,700^. If you are aiming to pay down your credit card balance, put your refund onto your credit card. If you have a credit card debt of $4,700, you could save over $2500 in interest and you'll wipe your credit card debit 14 years sooner than if you were just making the minimum repayment2.
3. Save it
If you consider stashing your tax refund in a high interest savings account like our Online Saver, your annual tax refund could grow to over $26,000 in just 10 years if you chose to save your $2,000 refund each year3. That could buy you a new car, a great overseas holiday or help with your home renovations!
Let's be honest, using your tax refund for a little splurge is a great way to reward yourself for all your hard work throughout the year. Remember to shop around to get the best price on whatever you are planning to buy.
Whether it's a new pair of shoes, watching your account balance grow or slashing your personal debt, we hope you make great use of your tax refund. If you'd like more information about using your tax refund to help reduce your personal debt – or saving it – talk to us today. We can even make an appointment with one of our financial planners for you, and your first consultation is free.