What should you do with your tax return refund?

Tax season is in full swing, so what should you do with your tax return?

a woman

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Tax season is in full swing. The organised ones among us have probably already got their tax returns lodged and perhaps even received their tax refund already.

With the government handing out a larger tax offset this year it's likely that more people will get a refund or their refund is bigger than before.

So, what should you do with it? Of course Prime Minister Morrison and Treasurer Frydenberg would hope some of the refund is spent to boost the economy.

But with the economy slowing down and loan stress rising for some people, I think there are wiser things to do with it.

You could park it in a savings account in a savings account with Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ), or whoever else you bank with.

Creating, or growing, cash savings is nearly always a good idea. You may have a problem of having too much cash at some point, but that's not a terrible problem to have if you have other investments.

I think the best long-term move is to invest in shares for the future. If you use your tax refund money to invest in shares then that could pay you again and again every year, or compound over time.

What could you choose to invest in? Well, a few hundred or few thousand dollars isn't going to be able to buy you a property.

You could go for shares such as a high-quality exchange-traded fund (ETF) like iShares S&P 500 ETF (ASX: IVV), a high-quality listed investment company (LIC) such as MFF Capital Investments Ltd (ASX: MFF) or high-quality shares like Altium Limited (ASX: ALU).

By putting your tax return to work, it could grow into a much bigger pile of money over the years and pay you many times over.  

Motley Fool contributor Tristan Harrison owns shares of Altium and Magellan Flagship Fund Ltd. The Motley Fool Australia owns shares of Altium and National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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