A couple uses a laptop and calculator to review their finances

Beginner

10 best ways to spend your tax refund

Share via

Tax season is here, and many families are looking forward to getting a refund. While it can be tempting to spend your tax refund on a new wardrobe or the latest smartphone, a smart way to use it is to benefit your family’s financial future. Here, we cover 10 ways to spend your tax refund while setting your family up for long-term success — and teach your kids about responsible money management.

1. Boost (or build) your emergency fund

Unexpected expenses can pop up at any time. It could be medical bills, car repairs, a broken appliance, or even the loss of a job. And when it happens, it can often create money stress in the family. Your emergency fund keeps your finances in check even when these unexpected things happen. Consider putting your tax refund into your emergency fund to build a stronger financial cushion.

How to involve kids: Explain the importance of having a financial “safety net.” You can even help them set up a small family emergency fund goal, like saving $50 for unexpected pet expenses.

2. Pay off debt

High-interest debt like credit cards and loans can drain your finances, but if you use your tax refund to pay off a chunk or even all of your debt, you can save more over the long term. If you have multiple accounts carrying debt, prioritize those with the highest interest rates first.

How to involve kids: Teach them how a $100 purchase on a credit card could end up costing $120 or more with interest if not paid off quickly. This will help show them how paying off debt now can save money in the long run.

3. Add to your child’s college savings

College tuition is expensive, so why not use your tax refund to tackle some of the cost now? You can add to a 529 college savings plan, or an UGMA or UTMA custodial account. Saving money for college now can help decrease the need for student loans in the future.

How to involve kids: Encourage them to contribute a small amount to their college savings from their own money — whether it’s birthday gifts, allowance, or part of their earnings from a summer job. And, let them watch the progress of the account over time.

4. Invest for the future

Have you considered using your tax refund to build an investment portfolio? Investing in stocks, bonds, or retirement accounts can help establish a solid foundation for future financial security. Whether it’s for retirement, education, or other financial goals, investing can help you build stability over time.

How to involve kids: Use Greenlight’s investment app to teach your kids about investing in the stock market with stocks and exchange-traded funds (ETFs). You can even let them choose a company they like and track its stock over time.

5. Start a family giving fund

Use part of your tax refund for charity or donate to a cause that’s important to your family. Are you an animal lover? Then, you might make a donation to your local animal shelter. If you are passionate about education, consider contributing to a scholarship fund.

How to involve kids: Let them choose a cause they’re interested in and decide how much to donate. You’ll help them develop empathy and experience the power of generosity by giving them a say in where the money goes.

6. Make home upgrades to save more over time

You can use your tax refund for home improvements that are more energy efficient or help you lower monthly expenses. Start by installing smart thermostats or LED lighting. Consider upgrading your insulation or replacing drafty windows. Or, you can use your tax refund to create a family garden to grow your own food.

How to involve kids: Let your kids help choose a project. Then, they can keep track of energy savings on your monthly utility bills or even help take care of the garden.

7. Invest in learning experiences

Instead of spending your tax refund on material things, consider using it on experiences that enrich your family’s life. It could be an educational trip or annual museum membership, summer camps or STEM programs, or teaching them financial literacy with the Greenlight app.

How to involve kids: Let them join in on the planning process. Research options together, set a budget, and then let them help you make the final decision.

8. Start a side gig

Have you been thinking about starting a side hustle? Use your tax refund to fund your new business so you can work toward generating extra income. It can be anything you love to do: making and selling handmade crafts, lawn care, baking, tutoring, or starting an online shop.

How to involve kids: Encourage them to think of ways to make money, whether it’s a lemonade stand, dog walking, or selling artwork. Then, use a part of your tax refund to help them get started.

9. Prepay bills or expenses to free up cash flow

One great way to use your tax refund is by paying a few major expenses upfront so you don’t have to worry about them later. You can pay off a few months of rent or your mortgage. Or, pay your insurance premium for the entire year in advance (you might even be able to get a discount!). You can also stock up on household essentials you use all year.

How to involve kids: Explain the benefits of paying ahead, like how it can reduce financial stress and free up money for other things.

10. Upgrade your family’s health and wellness

Make this a year of healthy options for your family by using your tax refund to prioritize your family’s health and well-being. Use your refund to pay for a family gym membership or fitness equipment you can use at home. You can even use it for meal prep services or mindfulness apps.

How to involve kids: Let your kids pick an activity they’re interested in, such as yoga, sports, or outdoor adventures. You can also set family health goals together. For example, try a new healthy recipe each week or go on regular weekend walks as a family.

Your tax refund is a great opportunity to improve your family’s future — and you can set a strong example for your kids by involving them in the process. What do you plan to do with your tax refund this year?

Want to budget as a family? Teach your kids essential budgeting skills with Greenlight’s award-winning educational money app. Try Greenlight, one month, risk-free.†

†Valid for new customers only. Subject to identity verification and minimum load requirements. Your first monthly fee will be billed to your parent wallet seven days after successful registration. To receive a refund of your first monthly fee, you must request to close your account on or before the day immediately preceding your first Monthly Billing Date. See the ‘Account’ tab of Settings by tapping the gear icon on the Greenlight app home page to confirm when your risk-free trial ends. See Terms for details.