Tax season is behind us, and millions of Americans are anxiously awaiting their tax refunds. According to the IRS, 70 percent of filers get a refund and the average 2016 refund was $2,860. Whether you are getting a paper check or a direct deposit, you may want to think twice before you rush to spend your return. Rather than blowing the money on a new TV, an Xbox, a new Prada bag or a vacation, consider investing your tax refund instead. Putting this lump of money to work as an investment will lead to more money in the long run, not less.
A GoBankingRates survey found that more Americans are smart with their refund than not. According to their data, 41 percent plan to put the money into savings, 38 percent plan to pay off debt, and only 16 percent plan to use the money for a splurge purchase or vacation. This is good news for Americans — saving and investing always do more for your long-term finances than spending.
New and experienced investors alike have countless options to invest their tax refunds. Every investment has different risks and potential rewards, so make sure you understand your options before you put your money to work. Here are three top options you can choose from to invest.
Many services require a $5,000 minimum, but not all investors can supply this. If you want to get started with a smaller amount, Acorns is perfect for you. Acorns accounts have no minimum balance. You can invest lump sums or set up a daily, weekly or monthly recurring transfer to fund your account.
Even better, Acorns lets you “round up” your credit and debit card transactions to invest. Let’s say you go to the local convenience store and spend $3.50 on a snack. Acorns can see that transaction, round it up to $4.00, and invest the 50 cents in your Acorns account. All investments go into a diverse, low-cost portfolio that you don’t have to worry about or manage. Acorns charges $1 per month for accounts below $5,000 and 0.25 percent for accounts with a balance over $5,000. For a beginner investor or someone with little cash to invest, this is one of the better options available today.
You can withdraw from your Acorns account at any time. If you save enough at Acorns, you might even reach enough to meet the minimum opening deposit elsewhere.
Did you know there are investments you can feel good about that may also pay you a positive return? Solar energy has made great strides in recent years, and exciting new technologies from companies like Tesla show what the future of a solar powered energy grid may look like.
Wunder Capital gives you the ability to invest in a portfolio of solar energy projects that pay a monthly cash flow. With as little as $1,000, accredited investors can buy into fully managed funds like the Wunder Income Fund with a 6 percent target return and the Wunder Term Fund with a target 8.5 percent return.
RealtyShares strives to be the easiest and most trusted way to access and invest in real estate and raise capital for high quality projects. With investments starting at $5,000, RealtyShares investors get some of the benefits of being a property owner or lender without the big, upfront cost of buying an entire building and the hassle of managing tenants. For borrowers, RealtyShares also has a comprehensive hard money lending guide to assist them in raising capital for their real estate projects.
You can’t earn a return unless you invest
It’s a shame to see so many people blow through lump income like a tax return or a bonus from work when those funds can go to better long-term use. You are already used to living without those excess funds, so your budget should allow you to use your return to invest unless you choose to pay off debt instead.
This is one bandwagon you should absolutely climb aboard! When you get your tax refund this year, use it wisely — consider investing. We live in a world of instant gratification, but don’t forget to prepare for your future as well. If you do, you’ll thank yourself down the road. And with these three great options, you can easily put your tax refund dollars to work for you.