- Three-quarters of Canadians expect to receive a tax refund this year - More than 50 per cent will put their refund toward reducing their household debt or will be investing the money - According to the Canada Revenue Agency, the average total individual tax refund received last year was $1,506
TORONTO, ONTARIO--(Marketwire - May 4, 2012) - With the April 30 income tax deadline now passed, BMO Financial Group today announced the results of a study which indicates that more than half of Canadians who will be receiving a refund this year have decided to use the money to reduce their household debt or invest it.
According to the study, conducted by Leger Marketing, almost three-quarters (74 per cent) of Canadians will be getting or anticipate getting a tax refund this year. Last year, the average individual tax refund received was $1,506 (Canada Revenue Agency).
Those receiving a refund this year plan on putting it towards the following:
- Paying household bills, credit card balances, mortgages and other debt (37 per cent)
- Saving or investing (16 per cent)
- Travel and leisure (eight per cent)
- Home renovations (six per cent)
"It's encouraging to see that more than one-third of Canadians are using their refunds this year to lower their overall debt-load," said Tina Di Vito, Head, BMO Retirement Institute. "It's especially important for Canada's Boomers to focus on reducing debt as they approach retirement. Although it may be tempting to splurge on items, paying off debt will be more beneficial in the long run."
Using your tax refund to invest
"Putting money into your savings or dedicating an amount to your investment portfolio is a wise move because it helps set yourself up well for the future," said Serge Pépin, Vice President, Investment Strategy, BMO Asset Management. "Whether it's saving for your child's education or investing for your retirement, putting money away will put you one step closer to reaching your financial goals."
Mr. Pépin added that making the effort to save and invest for the future should be a regular occurrence that is incorporated into every Canadian's financial plan and not just something that is done come tax refund time.
BMO offers tips on how to make the best use of your tax refund:
Pay down your RRSP loan or make your 2012 RRSP contribution now
If you took out a loan to maximize your Registered Retirement Savings Plan (RRSP) contribution and generate a larger refund, use your tax refund to pay down the loan. Alternatively, if you did not take out a loan, consider making your 2012 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.
Manage credit card debt
Pay down credit card debt - beginning with those that carry the highest rate - and consider using a low rate card or reducing your interest charges with a low interest rate option for purchases. For instance, the BMO Preferred Rate MasterCard offers a low rate of 11.9 per cent for an annual fee of $20 per year.
Make a lump sum mortgage payment
If you have a mortgage, use your tax refund to make a lump sum payment. Applied directly to your principal, a lump sum payment could save you significant dollars in interest costs over the life of the mortgage.
Top-up your savings
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, or a high interest savings account such as BMO's Smart Saver account can help maximize your savings.
Save for education
If you are saving for a child's education, consider opening a Registered Education Savings Plan (RESP) using your income tax refund or making a contribution to it.
The survey was completed from March 26th, 2012 to March 29th, 2012 using Leger Marketing's online panel, with a sample of 1500 Canadians.
For more information on saving and investing, please visit www.bmo.com.
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly-diversified North American financial services organization. With total assets of $538 billion as at January 31, 2012, and more than 47,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.