Tax time can mean good news for many Australians who may be eligible for a tax refund. If you are eligible for a refund, you may want to save it by starting a new savings plan, adding to the existing one that you have, or if you already have a home loan, depositing the refund into it.
The most straightforward option might be to put your refund into a savings account. The benefit of this would be that you would start earning interest straight away. It is also the easiest option for accessing your money when you require it, while still earning interest in the meantime. However, with the paltry interest rates on offer at present, this may not be the best option.
Even if you already have a savings account, it is worthwhile putting some thought into what type of account is right for you. Make sure that you choose an account that has the potential to reward you with bonus interest.
If you’ve been thinking about starting a savings plan, you could use your tax refund as a way to get started. A savings plan is basically a regular savings commitment where you set money aside on a regular basis into a savings account. This is a great way to start evidencing your savings for the deposit on your first home. Work out how much you will need to save and the date you want to save it by, and then you can work out how much you will need to save each month to help you reach your goal.
If you already have a savings plan, you might want to add to it. Putting your tax refund towards this existing plan could help you reach your goal sooner.
One option you could use to help resist spending your refund, could be putting it into a fixed term deposit. This means that once you have put your money into a term deposit, you will not be able to access it until the end of the term. You will receive a guaranteed rate of interest for the term that you select, so you will know exactly how much you will have at the end of the term.
If you do have a home loan, you may have the option of having a linked offset account. An offset account is a bank account that is linked to your home loan. As the name suggests, the balance of any money in the linked account ‘offsets’ the interest in the home loan. Putting your tax refund into an offset account to help save on interest is a great way to accelerate the ultimate goal of being mortgage free.