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6 ways to stash (not spend) your cash.

article-rock-your-refundHave you received (or are expecting to receive) a refund from the IRS this year? Even though a refund is really just the amount you overpaid in taxes during the year, it can feel like bonus money in your pocket — and the spending possibilities are seemingly endless and tantalizing.

Don’t indulge your fiscal fantasies quite yet ― first check out these six sensible (but satisfying!) ways to maximize your return*:

  1. Downsize your credit card debt: Putting your refund towards credit card debt is double the fun: First, you get to say goodbye to your balance, and second, you can avoid paying additional interest on said balance.
    Considering the median per-person credit card balance is $5,337Third Party Link, if your tax refund is anywhere near the 2015 average of $2,957Third Party Link, you’ll be able to pay off a good chunk of what you owe.
    Tip: Want to pay off any remaining balance? Follow these six strategies for tips on reducing your credit card debt.
  2. Spend some, save more: If you’re dying to buy something new with the money, a good compromise is to spend a portion and put the rest into a savings account that earns interest ― or even better, a CD (savings account that earns interest ― or even better, a CD (Certificate of Deposit) or money market account.
    Tip: A money market account will generally offer a higher interest rate than a standard savings or checking account, but will often require you to maintain a higher balance in the account. A CD tends to offer even higher interest rates, but requires you to leave your money in the account for a set timeframe (anywhere from a month to a few years), and if you withdraw early, you’ll be penalized. For more details, read Money Markets vs. CDs: Which one should you choose?
    You won’t be the only one stashing your cash: the National Retail Federation’s®Third Party Link annual Tax Returns Survey found that 49 percent of people expecting a refund planned to save the money rather than spend it right away. Now that’s what we call a great saving habit.
  3. Reinforce your retirement fund: Did you know that 26 percent of workers have less than $1,000 savedThird Party Link for their golden years? It’s never too early to plan for the future (and your future self will thank you!). Not only can you use your refund to start building a nice post-retirement cushion, you might be able to enjoy a tax benefit, too. To learn more about your options, check our guide to understanding your retirement savings plan.
    Tip: The IRSThird Party Link allows you to defer tax on up to $18,000 that you put into an employer-sponsored 401(k), 403(b), federal government Thrift Savings Plan or most 457 plans (plus an extra $6,000 if you’re 50 or older). Or, you can add $5,500 to an IRA each year (plus an extra $1,000 if you’re 50 or older).
    Related: 4 ways to kick-start your retirement investment strategy
  4. Focus on education: Paying off student loans? Take a nice chunk of your tax refund and pay it down even more. Strategize your pay-off by tackling the loan with the highest interest rate first. Or, if your loans all have the same interest rate, pay off the account with the smallest amount first so you can close it (and say so long!).
    If you don’t have student loans, consider starting or adding to a 529 planThird Party Link to save for your child’s future college costs. You won’t get an immediate federal tax deduction, but the plan’s earnings won’t be subject to federal tax when used for qualified higher education expenses, and you might receive a state tax benefit. (Find out how much on the National Conference of State Legislatures’Third Party Link list.) Various states typically have a specific contribution limit. However, it’s most likely higher than your refund will be — generally between $200,000 and $400,000, according to InvestopediaThird Party Link. For more info, check out our picks for the best ways to save for college costs.
    Related: Student loans have you seeing red?
  5. Invest in your home: Increase your home’s value with a renovation that will provide some serious ROI. Replace a steel entry door, for example, and you’ll be able to recover more than 91 percent of the roughly $1,335 cost, according to Remodeling Magazine’s Cost vs. Value ReportThird Party Link, which provides projected returns for 30 popular home projects. Another option is to pay down your mortgage, which can save you thousands in interest and cut years off the term of the loan.
  6. Donate it: Have a cause you’re passionate about? Give some or all of your refund to charity and, as an added bonus, if you itemize your deductions, you might be able to deduct some or all of your donation on next year’s taxes. Check out our tips and guidelines for giving.

If you want more money in your paycheck instead of having a large tax return, ask your employer’s payroll department for a new W-4 form, and subject to certain limitations, you may be able to increase your number of allowances. The tax withholding calculatorThird Party Link can help you determine how many to take. 

*The above is not intended as tax advice. Some or all of the tax benefits described may not apply to you based on your particular situation. Consult your tax advisor.

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