Back to top

3 Things not to do with your tax refund

May 1st, 2019

Getting your tax refund in the mail or directly deposited into your bank account can be one of the best feelings in the world. Here you thought Christmas passed a few months ago, but the government has sent you a gift of free money!

Before you get too excited, keep in mind that a tax refund is just a return of your money that you lent the government tax-free. There are plenty of good things to do with that money, such as paying down your debt, but here’s a list of things that you should definitely think twice about, no matter how tempting they are.

1) Let it sit in a no or low interest bank account

Leaving your tax refund in a regular bank account is arguably the worst thing to do since it likely won’t earn much interest. Seriously, it’s like putting your money under your mattress. What good is that? However, if you have your tax refund deposited directly into the EQ Bank Savings Plus Account, you’ll earn one of the highest interest rates in Canada -- currently 2.30%*--  on every dollar, starting from the moment the funds are deposited. You can rest assured that your funds are growing while you decide on how best to use the funds. What are you waiting for? Take advantage of the EQ Bank Savings Plus Account now, before you get tempted to blow your tax refund.

2) Purchase high MER mutual funds

We love the idea of investing your tax refund, but did you know that most mutual funds charge a management expense ratio of 2.5% - 3%? That’s an incredibly high fee to be paying for something that, historically, doesn’t even beat the index . If you want to start investing, consider purchasing exchange traded funds (ETFs) where the management fees are much lower but where returns can still be attractive. Over the course of your investing years, you could save tens of thousands of dollars in fees by picking ETFs over mutual funds.

3) Invest in a Money Market fund

One investment people consider when they want to keep their money safe is a money market fund, but are they still as good as they used to be? Like mutual funds, money market funds come with management fees in the 0.2% - 1.5% range. That eats into your returns when you consider that most money market funds have returned just 1% or less over the last decade. We think EQ Bank is a better place to park your money for any upcoming purchases you may have.

Here is how to have your tax refund deposited directly into the EQ Bank Savings Plus Account.

* Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.

Any information provided in this article is for information purposes only and is not intended to constitute financial advice. You should seek the advice of a qualified professional or undertake your own research before making financial decisions.