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Investing Tax Refunds Into Yourself And Your Family Can Be A Wise Financial Decision

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By Aaron Allen, The Seattle Medium

It’s tax season, or what many Americans might refer to as “tax refund’ season. It’s a time of year when many people plan on what to do with their tax refund, if they are fortunate enough to receive one.

Some people fret tax season because they have a lot of financial information to gather and hope that the person preparing their tax return can help identify deductions for which they didn’t know they were eligible. Yet, there are others who are eager fill out their tax returns online or rush to the office of their tax preparer in anticipation of how much money they will “get back this year.”

For most people, seeing their account balance spike when they receive a tax refund feels pretty good. However, according to many financial advisors, “that ‘extra money’ isn’t free cash — it’s earned money that you’ve overpaid to the IRS.” In some cases, it can be a significant lump sum of cash when compared to your income. A tax refund, if strategically utilized, can be a solid addition to your retirement plan, seed money for a future a dream vacation, and even an investment into the future of your children or grandchildren.

“Everything we’re discussing, when talking about one’s financial future involves a level of planning,” says Eli Taylor of JPMorgan Chase’s Wealth Management team. “No matter where you are on the financial spectrum, I highly encourage people to sit down and discuss their interests and future interests with an advisor.”

“In advising clients, I like to suggest three wise investment moves,” says Taylor. “For education purposes, the 529 plan is an investment account that offers tax benefits when used to pay for qualified education expenses. Another is the emergency savings account and lastly, a health savings account. All of these can help grow your financial savings.”

“Families can target each of these objectives simultaneously,” added Taylor. “Depending on the client’s situation, it could be more beneficial to have a plan to eliminate high interest debt first, and then redirect those funds to the emergency savings account and 529 plan.” 

Our financial health over the course of our lives exists on an ebb and flow.  It evolves as we evolve, it may even falter, when we falter. Through a number of initiatives, Chase can help provide people with the necessary knowledge and resources to help build a financial foundation for their future.

“Your financial plans are a living, breathing, document that evolves,” says Taylor. “It’s never too late to adopt a holistic planning approach to your finances.”

Taylor believes the connection between wishing, planning and successful execution of one’s financial goals and objectives are very important when it comes to people taking a serious look at their long-range financial goals. Instead of focusing on what they want to do right now, it’s equally important to focus on the future. One means of doing this is learning just how important your tax refund can be, the role it can play in planning, the versatility in how those monies can be utilized and just how fun planning can be when you learn how your money can work for you and your family.

“Holistic planning is adaptable and can apply to unique situations,” says Taylor. “It is not a one size fits all plan. Your plan is designed and made for you. The key is to begin, every penny is worth it and that includes your tax refund.”

One thing that many financial advisors agree about is that it is always a good idea to have money set aside for retirement. Whether you are placing money in a savings account, or investing in a 401(k) plan or IRA, the amount of money you are able to set aside today will influence your lifestyle after you retire.

“401(k) plans and IRAs are two types of retirement vehicles,” says Taylor. “A 401(k) is a type of employer retirement account, and an IRA is an individual retirement account. The investment objective of these plans will be unique to the individual considering factors such as their risk tolerance and time horizon.

“Typically, someone just starting their career and in the accumulation phase of retirement saving will have a greater tolerance to volatility due to their longer time horizon, versus someone nearing retirement, whom might be more conservative and focused on asset preservation,” continued Taylor. “I would encourage anyone with questions about retirement planning to speak with an advisor.”

At the end of the day, the notion of financial literacy and planning are about securing a financial legacy for you and your family. If you plan ahead, chances are that you will lessen the financial burdens you may have in the future. You may be able to take a dream vacation, buy a vacation home, help your child or grandchild pay for college or help them purchase their first home. Many of the things people dream about are possible as long as they have realistic goals and a realistic plan to achieve them.

“Planning is all about figuring out the goals that are most important to you,” says Taylor.  “As an advisor, I am able to come along side my client to help them craft a plan that is aligned with their desired outcomes.  Life is full of surprises and ups and downs, but a sound plan can help keep things on track.” 

Educating ourselves on the best ways to utilize our tax refund can be a great way to kick start your financial plan for the future. Using it diversely with the ability to transition, a tax refund can offer you the means to get ahead in your savings goals. 

More importantly – getting started early, educating your children and giving them a head start about financial literacy should also be taken into consideration. One of the main reasons we save is legacy, our future is our children and the youth of our community. It’s important for us to lead by example and teach them about planning and executing a financial plan in order to achieve their long-range financial goals.

“It’s never too early for parents to begin introducing sound financial principals to their children,” says Taylor. “In fact, parents who are Chase checking customers have access to Chase First banking. These are parent-owned accounts for children ages 6 to 17.  I personally have a six-year-old and a 10-year-old. Both kids have Chase First bank accounts that my wife and I use to teach them the benefits of saving and budgeting.”

For more information on savings accounts, retirement accounts and financial planning, please visit a local Chase Branch or visit them online at chase.com