With the April 30 income tax deadline now passed, advisors can look forward hearing from clients about investing their tax refunds.
BMO Financial Group Friday 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%) 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%)
- saving or investing (16%)
- 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,” says 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.”
For clients who want to use tax refunds to invest, advisors should be prepared to discuss options saving for a child’s education or investing for retirement.