Forbes Advisor

June 6: Some smart things to do with that tax refund

June 6, 2024

Ah, spring. Time to drag the golf clubs back up to the garage, to pump up the bike tires, and start getting the garden going. And, for many of us, time to get a nice tax refund cheque (or, more likely, a refund deposit).

Save with SPP wondered what people do with the refunds. Let’s take a look around and find out!

According to Fiona Campbell, writing for Forbes Advisor, tax refunds “are a sweet perk of filing your income tax return – and the good news is that most Canadians get one.” In fact, she notes, 58 per cent of filers got a refund in 2021, and the refund averaged just over $2,000.

This year, the average refund is more like $2,100 and change, she continues.

Campbell’s ideas on how to spend the refund don’t include “concert tickets, vacations, or designer clothes,” but are intended to “put you ahead financially in the long run and give you peace of mind instead.”

First (no surprise) is paying down debt. “If you carry a credit card balance, or only make the minimum payments, you’ll end up paying interest each month—and with APRs averaging 21 per cent, that can add up quickly,” she warns. The average Canadian owes more than $4,000 in credit card debt, she adds. If you don’t have credit card debt, you may have other loans or credit lines that can use a hand, she continues.

Next comes the mortgage. Campbell suggests making a prepayment on your mortgage, either as a lump sum or as an extra amount each payment. “If you don’t have other outstanding debt with higher interest rates, prepaying your mortgage can be a smart way to use your tax refund as it goes directly to the principal portion of your loan,” she notes.

Other ideas from Forbes Advisor include topping up your registered retirement savings plan (RRSP) or Tax Free Savings Account (TFSA), starting or adding to your emergency fund, or saving for a child’s education via a registered education savings plan (RESP).

The folks at the Nerd Wallet blog have a few more ideas.

“A tax return can be a great way to fund home repairs and upgrades. Maybe you have a big project to tackle, such as redoing a bathroom or renovating your kitchen. Spending your money on home upgrades is an investment that could shrink your home insurance bill and add value to your property in a way that pays off handsomely when it comes time to sell,” the blog advises.

Another idea, the blog continues, is to “invest in yourself.”

“While tackling debt, saving for the future and improving your home are all worthwhile uses for your tax-season windfall, don’t forget that you are also a smart investment. Maybe you’d like to start a side hustle, treat yourself to a monthly massage, or complete a professional certification. Though they might not earn compound interest, these types of investments can yield a sense of wellbeing and set you up for future success in a way that’s truly priceless,” the blog suggests.

Global News covers many of the same ideas, concluding that it really boils down to either paying down debt or adding to savings (or both).

The broadcaster suggests targeting credit card debt first.

“Credit card debt, which typically carries high interest rates at upwards of 20 per cent, can be particularly damaging to Canadians’ finances and “snowball” out of control, states financial author Sandy Yong in the article.

However, Yong says, even though saving and paying off debt are seen as the most sensible things to do with a refund, having a little fun is never out of the question. There’s no reason, she tells Global, to “feel bad about spending it on something for yourself.”

If you’re planning to use some or all of your tax return on your retirement savings, why not consider the Saskatchewan Pension Plan. SPP works just like an RRSP – the contributions you make are tax-deductible, which may help you get a refund down the road. And, way further down that road, the contributions you make to SPP – having been professionally invested, at a low fee, in a pooled fund – will grow into a future income stream for the retired you. A gift that keeps giving, as they say.

Check out SPP today!

Join the Wealthcare Revolution – follow SPP on Facebook!

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Set it and forget it — how to automate your savings

September 14, 2023

For many of us, retirement savings is something that — if we think about it at all — we worry about chiefly right ahead of the registered retirement savings plan deadline in March.

But there’s a school of thought that suggests automating your savings, rather than scraping up a lump sum at the last possible minute, is the way to go. Save with SPP took a look at what others are saying about this important topic.

At the Young and the Invested blog, automated savings is defined as “savings that happen passively — that is, without you having to do something every time you save.”

Through automated saving, the blog continues, “a predetermined sum of money is automatically transferred into a savings account or similar financial vehicle.” This happens on a recurring cycle, the article adds, typically “monthly, or every paycheque.”

So — how to do this? The article suggests that if all of your pay is deposited in your chequing account, you can set up — via online banking or a banking app — a regular transfer of some of that money to your savings account.

An article in Forbes Advisor continues that thinking, and advises that you make sure the savings account you choose offers high interest.

“To maximize your savings, choose one of the best high-interest savings accounts, which offer rates that are 10 times higher than the national average. Consider switching banks if your current account doesn’t pay much interest. Online banks often have the most attractive interest rates,” the article notes.

Another idea in the Forbes piece is the concept of boosting savings when you are cutting expenses. Say what, now?

“If you decide to make some cuts to your monthly spending, it’s important that you actually follow through with putting that extra money in savings. You can do this by increasing automatic transfers to your savings by the amount you plan to cut from your spending,” the article explains.

Now we get it. If you cut back on cable or a streaming app or two, don’t just spend that “saved” money — boost the amount you are transferring each month into savings.

The article also reminds us that when we get a raise, our monthly savings should get a raise too.

The U.S. articles mention the idea of using apps that “round up” spending, directing a portion of what you are buying into savings.

One such app, reports the Money Reverie blog, is called Moka (formerly Mylo).

The Moka app, reports the blog, connects to your savings account, and then does a little rounding up.

“For example, if you buy a cup of coffee for $3.25 with your credit card. The Moka app rounds up your purchase to $4.00 and saves the extra $0.75 in your Moka account. If you order that coffee everyday for one year, that’s $273.75 you have saved up. Your money would be automatically transferred from your chosen funding account to your Moka account,” the article explains.

We’re sure there are many other such “fintech” apps to choose from, but the idea of “rounding up” to save seems to be a good one.

If you’re a member of the Saskatchewan Pension Plan you can automate your savings in one of two ways. You can set up pre-authorized contributions to SPP from your bank account, or you can set up SPP as a “bill” via your online banking app and make automated bill payments to your future you. Automating savings means setting it and forgetting it — you can let SPP invest your savings for your future. Check out SPP today!

Join the Wealthcare Revolution – follow SPP on Facebook!

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Combing the Interweb for the best retirement savings tips

October 6, 2022

Years ago, when we were working away at Lakehead Living in Thunder Bay, Ont., a colleague asked us if we were contributing to a registered retirement savings plan (RRSP).

“What’s that?” we asked. And once it was explained that you would get a tax refund for contributions made to an RRSP, the 25-year-old us was in – starting off at $25 per month.

What’s the best retirement savings tip out there? Save with SPP decided to have a look.

Start saving today, advises the Merrill division of Bank of America. “Start saving as much as you can now and let compound interest — the ability of your assets to generate earnings, which are reinvested to generate their own earnings — have an opportunity to work in your favour,” the bank advises.

At the InvestedWallet blog there are two tips of note – to “fund your retirement account with side hustles,” and to “ditch the lavish vacations.”

Using “side hustles,” such as “flipping furniture, using a 3D printer to make money, or completing freelance gigs” is a great way to boost savings – direct your profits there, rather than to buying furniture or taking trips, the blog advises. And on big annual trips, Invested Wallet suggests cutting back on “destination” vacations (the average vacation in the U.S. costs $1,145 per year) and instead, doing something affordable during time off and putting the saved cash into retirement.

The Forbes Advisor offers up a couple of good tips – get rid of your debt now, and not after you are retired, and “practice retirement spending now.” The first one needs no further explanation – debt is harder to pay off when you are living on less.

The “practice” tip is intriguing. Basically, the article suggests that most retirees will live on 80 per cent of what they were earning before retiring. We had a friend who was fearful about living with her first mortgage. So her husband said look, let’s bank the difference between our rent and the mortgage in the run-up to buying the house, and live on the reduced income. This idea worked, her fears were abated and by now we’re sure that house is paid for.

At Sun Life, a variety of tips are included, with a sound bit of advice being “take full advantage of your employee pension plan.” A lot of times, the company pension plan may be optional. You don’t have to join. But if you don’t, you are missing out on putting away money for retirement, often with an employer match.

If you are in a defined benefit pension plan, be sure to find out if there are ways to purchase service for periods of time when you were off on a maternity or parental leave. Your future you will thank you later.

We’ll add a few others we have gleaned over the years.

Make your saving automatic – contribute something towards your retirement every payday, and up it when you get a raise. You will be paying yourself first.

A nice place to put your Canada Revenue Agency tax refund is back into your SPP or RRSP account. You’re making the refund tax-deductible.

Start small. We started with $25 a month nearly 40 years ago. Don’t think you have to start off big, or you may never start off at all!

If you haven’t started saving yet, a wonderful resource to be aware of is the Saskatchewan Pension Plan. It’s open to any Canadian with RRSP room. With SPP, you can contribute any amount you want, up to $7,000 per year, and can transfer up to $10,000 a year from other RRSPs. SPP will pool your contributions, invest them at a low cost, and grow them into a future source of retirement income. Check out SPP today!

Join the Wealthcare Revolution – follow SPP on Facebook!

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.