You submitted your income tax return. You may already be looking forward to receiving your refund. And for how you’ll use it.  A much-anticipated trip? A down payment on a new car?

Here's another thought: You can use that money to brighten your financial situation over the long term. How? Here are five smart ideas to make your tax refund work for you:

  1. Start an emergency fund
  2. Top up your RRSP
  3. Pay down your credit card debt
  4. Pay down your mortgage
  5. Open an RESP

1. Start an emergency fund

Do you have an emergency fund? Aim to have enough money stashed away to cover about three to six months of living expenses. We learned through the pandemic that no one is immune to major unexpected events.

Keep that money in an easily accessible, high-interest emergency savings account. Or use your tax-free savings account if you have contribution room. You can access these funds instead of dipping into your RRSPs – which would only increase your tax burden. 

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2. Top up your RRSP

Your registered retirement savings plan (RRSP) contribution limit for 2023 is 18% of earned income you reported on your tax return in the previous year, up to a maximum of $31,560.  That number will be adjusted if you put money in a company-sponsored pension plan. 

A 2021 survey showed a full 52% of Canadians didn’t plan on contributing to their RRSP. Remember even a modest contribution is better than none to help build your retirement fund.

And automating your savings every month or every with every paycheque can help you save even more. You won’t have to think about it when the deadline rolls around. And the interest on your money will compound over the whole year. 

Are you saving enough in your RRSP?


Use our RRSP calculator to find out

3. Pay down credit card debt

According to the Bank of Canada, 89% of Canadians reported owning at least one credit card in 2017. And that 70% of Canadians pay off their balance in full each month. That means 30% of us are paying an average interest rate of roughly 19% on our outstanding balances. Paying down or paying off your high-interest credit card debt is a wise move. It will free up money that you can use to boost your retirement savings.

4. Pay down your mortgage

The average Canadian home sold for $612,204 in January 2023, according to the Canadian Real Estate Association. 

If you bought your home recently, chances are you took on a large mortgage. Mortgage interest rates have started to inch up. Your payments may be less affordable when you renew your mortgage. Depending on your situation, it may make sense to reduce your mortgage debt as quickly as possible

Should you pay off your mortgage or save more in your RRSP?


Find out with our free, easy-to-use RRSP vs Mortgage calculator

5. Open an RESP

Using your tax refund to make annual registered educational savings plan (RESP) contributions is a great way to invest in your child's future. For the 2022-2023 school year, the average undergraduate tuition fee is $6,834, according to Statistics Canada. That's for one year out of a four-year program. It doesn't count books and living costs. Those expenses can add tens of thousands of dollars to the final bill. And if your kids are young, you’ll need to account for rising costs. An RESP is the perfect savings tool to save for your kids’ education.

For every dollar you put into an RESP, the Canada Education Savings Grant adds 20 cents. That’s an extra $500 if you contribute the maximum $2,500 per year until your child turns 17. Talk to your advisor about how to maximize the grant as special rules apply. 

Need help finding the investment options that are right for you? 

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This article is meant to provide general information only. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.